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In addition, investigators look at what is done with “float” compensation, whether it is retained as additional compensation or rebated to plans and whether the service provider discloses to plan sponsors what it does with the “float.” Service providers may hold plan assets in their own bank accounts while waiting for investment directions from participants; and/or distribution checks to be cashed. The short-term earnings generated in their bank accounts are generally referred to as “float.” “Making a profit is not a problem, the question is, is there a fiduciary using its authority, directly or through an affiliate, to increase its profits?” Monhart noted. Monhart mentioned as examples of service provider investigations the recent investigation of USI Advisors which found the investment adviser did not fully disclose the receipt of 12b-1 fees to clients (see “USI Advisors Settles DOL Suit Over Fees”) and the investigation of Morgan Keegan which found the broker recommended certain hedge funds to plans and in return received revenue-sharing and other fees (see “Morgan Keegan Ordered to Pay 10 Pension Plans”). He added that it is uncommon that the DOL sues a service provider; the agency will work closely with an entity to get it in compliance.
In addition, investigators look at what is done with “float” compensation, whether it is retained as additional compensation or rebated to plans and whether the service provider discloses to plan sponsors what it does with the “float.” Service providers may hold plan assets in their own bank accounts while waiting for investment directions from participants; and/or distribution checks to be cashed. The short-term earnings generated in their bank accounts are generally referred to as “float.”
“Making a profit is not a problem, the question is, is there a fiduciary using its authority, directly or through an affiliate, to increase its profits?” Monhart noted.
Rebecca Mooreeditors@plansponsor.com