The Labor Department has made it clear that revenue-sharing allocationhas to be done on a prudent and reasonable basis. Problem is, itleft it at that.
And that leaves a lot of plan sponsors scratching their headsand wondering what is prudent and reasonable and what isn't. Chargea flat, per-head fee? Use a pro rata formula? Charge allparticipants the same expense ratio?
Revenue-sharing in defined contribution plans has “been fairlycommon for about 20 years, but the awareness of it has only been inthe last five to 10 years or less,” said Fred Reish, an attorneywith Drinker, Biddle & Reath in Los Angeles. “The law hasn'treally caught up with that yet. So, there's no guidance for plansponsors on how revenue-sharing should be allocated.”
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