PEP Fees

Must all fees be applied to each adopter in a PEP ?

One of the adopters in the PEP is the 3(38) for the PEP.  They do not want to charger their 3(38) fees for just their plan.

Are they allowed to do that ?  Would it take a supplemental service agreement ?

Thanks!

Your inquirer seems to have a good impulse. Regarding a pooled-employer plan, an adopting employer has fiduciary responsibility (at least) for its selection and monitoring of not only the pooled plan provider but also all persons that are a named fiduciary of the PEP, including the PEP’s § 3(38) investment manager.

An employer should not use its fiduciary discretion about whether to adopt a PEP to cause itself to get compensation as the PEP’s investment manager.

To avoid self-dealing, the conflicted fiduciary might engage an independent fiduciary to decide whether the employer should adopt the PEP, meet the conditions of a prohibited-transaction exemption, or avoid the compensation to the extent of the plan assets (or other portion of the fee) attributable to the adopting employer’s subplan.

If a part of the solution is avoiding the compensation, the investment manager and the pooled plan provider might resolve and document their arrangements.

Further, avoiding self-dealing about the investment manager’s fee is not the only conflict such a conflicted fiduciary needs to manage.

This is not advice to anyone.