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Compensation: For purposes of 408(b)(2), Compensation includes anything of monetary value, such as money, gifts, awards and trips, but does not include non-monetary compensation valued at $250 or less, in the aggregate, during the term of the contract or arrangement. However, if the aggregate of non-monetary compensation is valued at $250 or less during the term of the contract then “compensation” does not include the non-monetary compensation. The definition of compensation includes descriptions of both “direct” and “indirect” compensation.

  • Direct Compensation is compensation received directly from the covered plan.
  • Indirect Compensation is compensation received from any source other than the covered plan, the plan sponsor, the covered service provider, an affiliate, or a subcontractor, if the subcontractor receives such compensation in connections with services performed under the subcontractor’s contract or arrangement described in the definition of subcontractor.

For purposes of the regulation, a description or an estimate of compensation may be expressed as a monetary amount, formula, percentage of the covered plan’s assets, or a per capita charge for each participant or beneficiary, of the compensation cannot reasonably be expressed in such terms, by any other reasonable method.

Covered Plan: Covered plans generally include defined contribution plans such as 401(k) plans and ERISA-covered 403(b) plans and defined benefit pension plans, but do not include SEPs, SIMPLES, IRAs or welfare benefit plans. The 408(b)(2) disclosures apply to all covered plans regardless of plan size.

Covered Service Provider: A service provider that enters into a contract or arrangement with a covered plan and reasonably expects $1,000 or more in direct or indirect compensation to be received in connection with providing one or more of the services described below:

  • Services as a fiduciary or registered Investment Adviser.
  • Certain financial intermediaries, recordkeepers or brokers providing services to participant-directed plans.
  • Other services for indirect compensation.

Covered service providers do not include an affiliate or subcontractor of a covered service provider.

Covered Services: generally includes fiduciary services and certain recordkeeping and brokerage services, as well as certain accounting, auditing, actuarial, appraisal, banking, consulting, custodial, insurance, investment advisory, legal, recordkeeping, securities, brokerage, third party administration, or valuation services if the service provider reasonably expects to receive indirect compensation for such services.

Current Net Expense Ratio: The cost of investing and administering assets, including management fees, in a mutual fund or other collective fund expressed as a percentage of total assets. Total paid to the fund company from the fund assets, represented as an annualized percentage. The information reflected in this table for Current Net Expense Ratio is provided by Morningstar. This Current Net Expense Ratio is reflected in the Investment Product Expense section of the disclosure document.

Fee Method: Method of applying a fee is described as either billed, deducted or netted from distribution and is generally described as:

  • Netted – the fee is netted from the participant-requested transaction where the fee is taken first and the net amount remaining is distributed to the participant (i.e. distribution fee, loan origination fee).
  • Deducted – the fee is deducted from the participant accounts in addition to the participant-requested transaction amount (i.e. express mail charge, etc.).
  • Billed – the fee is billed by the intermediary to the plan and is not recouped from participant accounts.

Fee Amount: The amount is reflected as either a flat dollar or a percentage in the Administrative Expenses table of the disclosure document. The amount is established by the plan sponsor when providing instructions to the recordkeeper to set up or to process the associated fee.

Plan Assets: Plan assets referenced on the disclosure cover page are reflected as of the last calendar day of the month. The total reflected includes amounts such as forfeiture balances, SDBA Core accounts, and outstanding loan balances, if applicable.

Plan Participants: Plan participants referenced on the disclosure cover page includes all participants (active and terminated) with an account balance as of the last calendar day of the month.

Recordkeeping/Administration Fee: Fee for providing recordkeeping and other plan participant administrative type services. For start-up or takeover plans, these fees typically include charges for contacting and processing information from the prior service provider and “matching up” or mapping participant information. Use of this term is not meant to identify any ERISA Section 3(16)(A) obligations.

Revenue Type: 12b-1 Fee:

Generally, an annual marketing or distribution fee paid on a mutual fund. The 12b-1 fee is considered an operational expense and, as such, is included in a fund’s expense ratio. The mutual fund 12b-1 fee is expressed as a percent of assets in the Investment Product Expenses section of the disclosure document.

Revenue Type: Administrative: In the Investment Product Expenses table, administrative revenue types include all indirect compensation such as administrative, recordkeeping, Sub-TA, shareholder services fee, etc. paid by the fund. Administrative amounts can be reflected as a dollar, percentage or both.

Recordkeeping Services: Generally, recordkeeping services include services related to plan administration and monitoring of plan and participant and beneficiary transactions such as enrollment, payroll deductions and contributions, offering designated investment alternative and other covered plan investments, loans, withdrawals and distributions. It also includes the maintenance of covered plan and participant and beneficiary accounts, records and statements. This is a broad definition of recordkeeping and is intended to provide basic parameters.