This is another in a series of articles on interesting issues presented under the 408(b)(2) regulation and its disclosure requirements.
It has become fairly common for plans to have expense recapture accounts (which are also known as ERISA budget accounts, PERAs—plan expense recapture or reimbursement accounts, and by a variety of other names). Typically, those accounts are established within a plan when a service provider (most often the recordkeeper) receives compensation through revenue sharing in excess of its reasonable charges. For example, if a reasonable charge for the recordkeeping/TPA services was $50,000 and the recordkeeper received $60,000 in revenue sharing, the excess amount would be deposited into the expense recapture account—thereby avoiding the prohibited transaction issue of excess compensation.
However, sometimes the recordkeeper/TPA places the money in its corporate account and tells the plan sponsor that the money can be spent for … Read More »