The problem of a recordkeeping asset-based fee

Ary Rosenbaum

Ary Rosenbaum - The Rosenbaum Law Firm P.C.

A long time in a galaxy, far far away (the time before fee disclosure regulations), I talked to the top salesman of a certain third-party administration (TPA) firm that charged an asset-based fee. The TPA wasn’t a producing one, they just did the TPA work.

I asked the salesman why they priced plans that way because my experience working for TPAs is that it’s no more to run a 100 person $100 million plan than a 100 person $10 million plan, that TPA work is based on the number of heads (accounts). I believed that pricing based entirely on assets wasn’t rational.

Well, some ERISA litigators feel the same way. One of the big staples of the Trader Joe’s case is the fact that Trader Joe’s TPA fees are asset-based and therefore, aren’t rational or prudent under ERISA. “The cost of recordkeeping services depends on the number of participants, not on the number of assets in the participant’s account. Thus, the cost of providing recordkeeping services to a participant with a $100,000 account balance is the same for a participant with $1,000 in her retirement account.” I’ve been saying that for years, the only difference is that I’m not suing anyone.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

Written by:

Ary Rosenbaum

The Rosenbaum Law Firm P.C. on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.