PLANSPONSOR - August/September 2021 - 10

UPFRONT
Mismanagement of ERISA Accounts
LEGAL CHALLENGES to the alleged
mismanagement of revenue sharing have
appeared in a number of recent Employee
Retirement Income Security Act (ERISA)
excessive fee lawsuits.
The accumulation of revenue
sharing establishes what are called
ERISA accounts-aka suspense accounts,
revenue-sharing accounts or expense
reimbursement accounts. According to
attorneys from law firm Haynes and
Boone LLP, plan sponsors that make
missteps in managing these accounts
could face participant claims.
Assets in ERISA Accounts
Money in ERISA accounts comes from
defined contribution (DC) plan investments
that generate revenue sharing, says
Susan Wetzel, partner and chair of the
employee benefits and executive compensation
practice group at Haynes and
Boone. For example, participants invested
in Fund X pay a fee for that fund; a portion
of the fee goes back to the plan in what is
called revenue sharing.
Some plans provide that the participants
receive the money. " That's probably
the cleanest way to handle revenue sharing
so you don't generate an ERISA account, "
Wetzel says. Most sponsors consider the
accounts plan assets, put revenue sharing
into a trust and use it to pay fees, she says.
" When you see an ERISA account, it
is usually from a bundled service arrangement, "
explains Eric Keller, a partner and
a member of the global compensation,
benefits and ERISA practice group at law
firm Paul Hastings LLP. " The TPA [thirdparty
administrator] or recordkeeper puts
together a menu of funds and is compensated
in part based on revenue sharing
from various management fees of funds
offered on the platform. For example,
if there's a management fee of 70 basis
points [bps], maybe 50 basis points goes to
10 PLANSPONSOR.COM August - September 2021 Art by Alfonso de Anda
the investment manager and the other 20
is shared with the TPA or recordkeeper that
makes funds available to plans.
" Depending on how much revenue
sharing the TPA gets, " Keller continues,
" and what is negotiated with plan sponsor
clients, there will be a 'rebate,' where
money is made available to the sponsor
either by direct contribution to the plan
trust or by an unfunded notional account
for a period of time, which can be used
for plan expenses. "
In response to considerable litigation
about fees, ERISA accounts were devised, to
alleviate plan sponsor concerns that recordkeepers
made too much money, Keller says.
Now, the management of revenue sharing
is being questioned legally.
It was TPAs who suggested, back
when revenue sharing became prevalent,
about 15 years ago, that the money be accumulated
in a plan account; this could have
given the accounts a stigma, Wetzel says.

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PLANSPONSOR - August/September 2021

Table of Contents for the Digital Edition of PLANSPONSOR - August/September 2021

To Ensure All Are Well
2021 PLANSPONSOR National Conference
Equipped for Anything?
The Security of Savings
Take a Load Off
PLANSPONSOR - August/September 2021 - Cover1
PLANSPONSOR - August/September 2021 - Cover2
PLANSPONSOR - August/September 2021 - 1
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PLANSPONSOR - August/September 2021 - To Ensure All Are Well
PLANSPONSOR - August/September 2021 - 17
PLANSPONSOR - August/September 2021 - 18
PLANSPONSOR - August/September 2021 - 19
PLANSPONSOR - August/September 2021 - 2021 PLANSPONSOR National Conference
PLANSPONSOR - August/September 2021 - 21
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PLANSPONSOR - August/September 2021 - Equipped for Anything?
PLANSPONSOR - August/September 2021 - 31
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PLANSPONSOR - August/September 2021 - The Security of Savings
PLANSPONSOR - August/September 2021 - 35
PLANSPONSOR - August/September 2021 - Take a Load Off
PLANSPONSOR - August/September 2021 - 37
PLANSPONSOR - August/September 2021 - 38
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PLANSPONSOR - August/September 2021 - 40
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