When plan sponsors appoint Stone Hill Fiduciary Management as Named Fiduciary, they can be confident that they will avoid fiduciary breaches related to revenue sharing payable by mutual fund companies, trust companies, and custodians on plan investments.
We become responsible for the following fiduciary duties:
Fee Reasonableness: We calculate annually the amount of record keeping fees, custody fees, and revenue sharing payable to the record keeper, custodian, and trustee.
Offset Negotiation: We determine revenue sharing, negotiate a fee reduction for record keeping services, and review the competitive markets and service deliverables.
Fund Replacement: We effect fund replacements pursuant to investment policy statement criteria and not based upon service provider proprietary fund requirements.
Plan Operation: We manage a client’s plan in accordance with the plan document, summary plan description, investment policy statement, and applicable ERISA law.
Plan Governance: We evaluate and approve investment fund options and service provider agreements, and execute and document plan fiduciary decisions.
Plan Expenses: We control service provider fees and expenses to avoid having the plan subsidize corporate services provided by the service provider to the employer.
Monitoring: We monitor recordkeeping fees, service provider deliverables, fund expense ratios, hard dollar fees, and revenue sharing payable to service providers.
Risk Sharing: We determine whether service providers need to charge hard dollar fees to replace lost revenue sharing, thereby shifting risk and increasing fees to the plan.
Revenue sharing is a plan asset and refers to the portion of the expense ratio that is used to pay plan fees or credited to participant accounts. Plan sponsors may pay plan expenses with revenue sharing, hard dollars, or a combination of both. The expense ratio, which is the fee charged by the fund, decreases gains and increases losses of investments in participant accounts. If a plan sponsor opts for revenue sharing as the method of paying plan fees, then we need to determine if this method is in the best interest of plan participants. Greater revenue sharing may mean higher expense ratios.
Plaintiffs have alleged in excess-fee complaints that plan sponsors have not sufficiently scrutinized compensation and revenue sharing arrangements, thus violating ERISA.