The Department of Labor (the “DOL”) issued Advisory Opinion 2013-03A (July 3, 2013) under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This advisory opinion, issued in response to a request from Principal Life Insurance Company (“Principal”), addresses whether revenue sharing payments received by a plan recordkeeper constitute “plan assets” subject to ERISA’s fiduciary duty and prohibited transaction rules. In the facts underlying the advisory opinion, Principal receives revenue sharing payments (such as 12b-1 fees, shareholder and administrative services fees, or similar payments) from the investment options made available to the plans for which it provides recordkeeping services. Principal in turn creates a bookkeeping account to which it credits part of the revenue sharing payments it receives. Those credits may be used, in accordance with the applicable recordkeeping agreement or at the direction of a plan fiduciary, to pay proper expenses incurred in administering the plan. The advisory opinion emphasizes that no part of the revenue sharing payments are segregated from the general assets of Principal for the benefit of the plan, and no representations are made to the plan or its participants that those payments will be set aside for the benefit of the plan or its participants. Under these facts, the advisory opinion concluded that the plan’s asset was the contractual obligation of Principal to apply the credits for the benefit of the plan, but not the actual revenue sharing payments themselves. The advisory opinion makes it clear that the determination of whether the revenue sharing payments are plan assets will turn on the specifics of how the arrangement is structured.
Alert July 30, 2013