The document discusses the complexities of retirement plan fee levelization for institutional settings, emphasizing the importance of equitable fee allocation among participants as guided by ERISA regulations. It outlines the various types of investment and recordkeeping fees, detailing how revenue sharing impacts participant expenses, and highlights methodologies to implement levelized fee structures. Additionally, it presents examples demonstrating the differences in participant expenses with and without levelization, advocating for a more equitable approach to fee distribution.

1. Plan Fee Levelization - Going "Back to the Future"
2016

2. For Institutional Use Only
Hard Dollar / Explicit Fee
Agreements
Mutual Fund Revenue
Sharing
Multi Share Class
Proliferation
“Free” Retirement Plan
Administration
Lawsuits Challenging
Revenue Sharing /
Excessive Fees
DOL Fee Disclosures
404(a)(5)
408(b)(2)
DOL Fiduciary Rule
“Conflict of Interest Rule”
Larger Plans move
“Back to the Future”
Fee Levelization
Plan Fee Levelization - Going "Back to the Future"
2
Retirement
Plan Fees
have come full
circle

3. For Institutional Use Only
What Does ERISA Say?
Excerpt from Field Assistance Bulletin 2003-3 (May 19, 2003)
“…ERISA contains no provisions specifically addressing how plan expenses may be allocated
among participants and beneficiaries…”
“…When the plan documents are silent or ambiguous on this issue, fiduciaries must select the
method or methods for allocating plan expenses. A plan fiduciary must be prudent in the
selection of the method of allocation. Prudence in such instances would, at a minimum, require a
process by which the fiduciary weighs the competing interests of various classes of the plan’s
participants and the effects of various allocation methods on those interests. In addition to a
deliberative process, a fiduciary’s decision must satisfy the “solely in the interest of participants”
standard…”
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4. For Institutional Use Only
Today’s Agenda
1. Introduction to Investment / Recordkeeping Fees
2. Allocation of Fees
3. Implementing Levelized Solutions
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5. Introduction to Investment /
Recordkeeping Fees

6. For Institutional Use Only
Investment / Recordkeeping Fees
An overview
The Expense Ratio is an annual fee charged by all mutual funds, separate accounts and ETFs. It is generally expressed as the
percentage of assets deducted each fiscal year for fund expenses, including management fees, operating costs, 12b-1 fees,
shareholder servicing fees, Sub-TA fees, and any other asset-based costs incurred by the fund.
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 Fees charged by the fund management company for managing the
assets.
 Charged as a percentage of the total invested assets and deducted
from the investment return.
Investment Management Fees
 Fees charged on total invested assets and deducted from the
investment return by the fund management company.
 Includes commissions to brokers, marketing expenses and other
administrative services.
12b-1 Fees
 Fees charged on total invested assets and deducted from the
investment return by the fund management company.
 Revenue sharing is deducted from fund assets by the fund
management company and shared with the service provider.
Shareholder Servicing Fees
 Fees charged on total invested assets and deducted from the
investment return by the fund management company.
 Brokerage firms and mutual funds often contract recordkeeping and
other services to a third party called a sub-transfer agent.
Sub-TA (Agency Transfer Fees)
 Additional fees charged on Plan-specific assets and deducted from the
investment return by the service provider.
 This fee is in addition to the Expense Ratio.
Asset / Wrap Fees
Investment/Fund
Management Fees
12b-1 Fees
Shareholder
Servicing Fees
Sub-TA (Agency
Transfer Fees)

7. For Institutional Use Only
Investment / Recordkeeping Fees
The most common fees
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Investment/Fund
Management Fees
Paid to Investment Managers
For managing assets
Revenue Sharing
Paid to Recordkeeper
To offset Plan-related Fees
Investment/Fund
Management Fees
Revenue Sharing
The Full “Net” Expense Ratio*
What participants/investors pay
*The net expense ratio may also include additional fees, such “wrap” and other servicing charges.
The revenue sharing
component is the primary focus
of the following pages.

8. For Institutional Use Only
Paying Retirement Plan Fees
Putting it all together
 Under the provisions of ERISA §404(a)(1)(A), Plan assets may be used to defray necessary
and reasonable plan expenses in the form of direct payments to designated plan service
providers.
 Recordkeepers have typically been compensated through:
o payments received directly from the plan (e.g. a fee charged to participant accounts on an annual
basis), and/or
o payments received from other sources, such as the plan’s investment options (revenue
sharing)
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Management Fees
• Paid to Investment Manager or
Sub-Advisor
Service Costs / Revenue Sharing
• 12b-1 Fees
• Sub-Transfer Agent Fees
• Shareholder Servicing Fees
Paid by Participants
1% Operating
Expense Ratio
(100 basis points)
Investment
Management Fees
65 basis points (0.65%)
Revenue Sharing
35 basis points (0.35%)
Example “Fund A”

9. For Institutional Use Only
Plan Fees – An Example
Assumptions:
 The Plan is administered by ABC Recordkeeper with a Revenue Requirement of 5 basis
points (bps), or 0.05%.
 We’re focused on 3 participants in the Plan: Jack, Jane, and Joe
 All three have a balance of exactly $100,000
 All three are currently invested in only one fund, and it is the same fund (but each using a different share
class – R4, R5, R6 – We recognize one Plan using 3 share classes is unlikely. This is a hypothetical
example to demonstrate a point.)
 Therefore, each fund has a beginning balance of exactly $100,000.
 For simplicity, all three fund’s have a “gross” return of 3%, with zero investment/fund management fees.
Therefore, the only fee is the revenue sharing portion of a normal expense ratio.
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10. For Institutional Use Only
Plan Fees Without Fee Levelization
Without Fee Levelization
 Participants pay an uneven share of Plan expenses
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Jack
Jane
Joe
Investment
Option
Revenue
Sharing
Revenue
Requirement
Account
Credit/Debit
Actually
Paid*
Fund A 0.35 0.05 0.00 0.35
Fund B 0.05 0.05 0.00 0.05
Fund C 0.00 0.05 0.00 0.00
*There is also excess revenue placed into an expense account, which will impact the “actual” payment once
reallocated.

11. For Institutional Use Only
Plan Fees With Fee Levelization
With Fee Levelization
 Through a revenue sharing adjustment, all participants pay an equal amount of Plan expenses
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Jack
Jane
Joe
Investment
Option
Revenue
Sharing
Revenue
Requirement
Account
Credit/Debit
Actually
Paid*
Fund A 0.35 0.05 + 0.30 0.05
Fund B 0.05 0.05 0.00 0.05
Fund C 0.00 0.05 - 0.05 0.05
*There is no excess to the Expense Account unless the Plan Sponsor decides to add an additional amount
to the “levelized” fee.

12. For Institutional Use Only
Levelizing
Adjustment
Initially
Paid
PERA
Reallocation*
Actually
Paid
$300 $350 $0.00 $50
$0 $50 $0.00 $50
-$50 $0 $0.00 $50
$400 $0.00 $150
Levelizing
Adjustment
Initially
Paid
PERA
Reallocation*
Actually
Paid
$0 $350 $83.16 $267
$0 $50 $83.40 -$33
$0 $0 $83.44 -$83
$400 $250 $150
Plan Fees – An Example
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Initially shown on
participant statement
Shown on participant
statement after
PERA Reallocation
Everyone pays the
same amount!
Without Levelization
Gross Ending
Balance
Revenue
Sharing (%)
Revenue
Sharing ($)
Net Ending
Balance
Jack $103,000 0.35% $350 $102,650
Jane $103,000 0.05% $50 $102,950
Joe $103,000 0.00% $0 $103,000
Total $309,000 $400 $308,600
Revenue
Req. (%)
0.05%
0.05%
0.05%
$150
Actual Account
Ending Balance
$102,733
$103,033
$103,083
$308,850
With Levelization
Gross Ending
Balance
Revenue
Sharing (%)
Revenue
Sharing ($)
Net Ending
Balance
Revenue
Req. (%)
Jack $103,000 0.35% $350 $102,650 0.05%
Jane $103,000 0.05% $50 $102,950 0.05%
Joe $103,000 0.00% $0 $103,000 0.05%
Total $309,000 $400 $308,600 $150
Net Ending
Balance
$102,950
$102,950
$102,950
$308,850
*PERA Reallocation is assumed to be on a pro rata basis

13. For Institutional Use Only
Client Levelized Pricing Analysis
Investment Option
% of Core
Plan Assets
Assets
9/30/2015
Guaranteed Income Fund 19.58% $27,256,129
Vanguard Institutional Index 10.75% $14,957,503
American Funds Growth Fund of America R4 15.97% $22,222,961
American Funds EuroPacific Growth R4 9.75% $13,569,258
Metropolitan West Total Return Bond M 9.01% $12,541,717
MFS Total Return R4 5.98% $8,322,914
American Funds Washington Mutual Inv R4 5.54% $7,704,797
Goldman Sachs Mid Cap Value Instl 4.63% $6,440,400
Vanguard Mid Cap Index I 3.99% $5,552,671
T. Rowe Price Mid Cap Growth 3.85% $5,352,210
American Funds Fundamental Invs R4 3.17% $4,417,597
Vanguard Small Cap Index Adm 3.12% $4,342,767
Franklin Small Cap Growth Adv 2.86% $3,981,064
DFA US Targeted Value I 0.78% $1,091,765
MFS Value R4 0.84% $1,175,104
Dodge & Cox Income 0.18% $254,078
Total Core Plan Assets 100.00% $139,182,934
Participant Count
Revenue Requirement (10bps)
Total Revenue Sharing Generated from Funds
Revenue Excess/(Shortfall)
Out-of-Pocket expense to meet Revenue Requirement
Sent to Trust Reimbursement Account
Total Paid for Recordkeeping
Total Paid for Recordkeeping on a per participant basis
Total paid by participants (per individual)
Expense
Ratio
Revenue
Share (%)
Revenue
Share ($)
0.25% 0.25% $68,140
0.04% 0.00% $0
0.68% 0.35% $77,780
0.84% 0.35% $47,492
0.68% 0.35% $43,896
0.50% 0.15% $12,484
0.65% 0.35% $26,967
0.74% 0.15% $9,661
0.08% 0.00% $0
0.78% 0.15% $8,028
0.66% 0.35% $15,462
0.09% 0.00% $0
0.91% 0.15% $5,972
0.40% 0.00% $0
0.63% 0.15% $1,763
0.43% 0.08% $203
0.497% 0.228% $317,848
Participant Count 2,927
Revenue Requirement (10bps) 0.100% $139,183
Total Revenue Sharing Generated from Funds 0.228% $317,848
Revenue Excess/(Shortfall) $178,665
Out-of-Pocket expense to meet Revenue Requirement 0.000% $0
Sent to Trust Reimbursement Account 0.128% $178,665
Total Paid for Recordkeeping 0.100% $139,183
Total Paid for Recordkeeping on a per participant basis $48
Total paid by participants (per individual) $48
Current Share Classes
Levelized
Fee
Credit/Debit
Net
Participant
Expense
Total Participant
Recordkeeping
Expense
0.10% 0.15% 0.10% $27,256
0.10% -0.10% 0.14% $14,958
0.10% 0.25% 0.43% $22,223
0.10% 0.25% 0.59% $13,569
0.10% 0.25% 0.43% $12,542
0.10% 0.05% 0.45% $8,323
0.10% 0.25% 0.40% $7,705
0.10% 0.05% 0.69% $6,440
0.10% -0.10% 0.18% $5,553
0.10% 0.05% 0.73% $5,352
0.10% 0.25% 0.41% $4,418
0.10% -0.10% 0.19% $4,343
0.10% 0.05% 0.86% $3,981
0.10% -0.10% 0.50% $1,092
0.10% 0.05% 0.58% $1,175
0.10% -0.02% 0.45% $254
0.100% $139,183
2,927
0.100% $139,183
0.100% $139,183
$0
0.000% $0
0.000% $0
0.100% $139,183
$48
$48
Levelized Pricing
Sample Analysis
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Client Levelized Pricing Analysis
Investment Option
% of Core
Plan Assets
Assets
9/30/2015
Guaranteed Income Fund 19.58% $27,256,129
Vanguard Institutional Index 10.75% $14,957,503
American Funds Growth Fund of America R4 15.97% $22,222,961
American Funds EuroPacific Growth R4 9.75% $13,569,258
Metropolitan West Total Return Bond M 9.01% $12,541,717
MFS Total Return R4 5.98% $8,322,914
American Funds Washington Mutual Inv R4 5.54% $7,704,797
Goldman Sachs Mid Cap Value Instl 4.63% $6,440,400
Vanguard Mid Cap Index I 3.99% $5,552,671
T. Rowe Price Mid Cap Growth 3.85% $5,352,210
American Funds Fundamental Invs R4 3.17% $4,417,597
Vanguard Small Cap Index Adm 3.12% $4,342,767
Franklin Small Cap Growth Adv 2.86% $3,981,064
DFA US Targeted Value I 0.78% $1,091,765
MFS Value R4 0.84% $1,175,104
Dodge & Cox Income 0.18% $254,078
Total Core Plan Assets 100.00% $139,182,934
Participant Count
Revenue Requirement (10bps)
Total Revenue Sharing Generated from Funds
Revenue Excess/(Shortfall)
Out-of-Pocket expense to meet Revenue Requirement
Sent to Trust Reimbursement Account
Total Paid for Recordkeeping
Total Paid for Recordkeeping on a per participant basis
Total paid by participants (per individual)

14. Implementing Levelized Solutions
(Service Contracts)

15. For Institutional Use Only
Pricing Model Comparison
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 Revenue Sharing used to pay for
plan administration
 Provider assumes risk of market
fluctuations and participant
investing behavior
 Fund / share class changes may
necessitate Fee Review
 Includes full suite of services
 Fixed basis point Recordkeeping
Fee
 The Plan assumes risk of material
changes in participant investing
behavior
 Provider assumes risk of market
fluctuations
 Surplus / Deficit varies based on
Administrative Revenue generated
by Plan investment options
 Set number of services – Others to
be negotiated
 Consistent per participant
Recordkeeping fee
 The Plan assumes risk of all
market fluctuations and participant
investing behavior
 Surplus / Deficit varies based on
Administrative Revenue generated
by Plan investment options
 Set number of services – Others to
be negotiated
Time
RevenueperParticipant
Bundled, Asset Based Model
Time
RevenueperParticipant
Fixed Basis Point Model
Time
RevenueperParticipant
Fixed Dollar Model
Actual Revenue Paid Revenue Surplus Revenue Deficit

16. Marketplace Solutions

17. For Institutional Use Only
Ordered from least to most desirable:
1. All “institutional” share classes (or equivalent, such as R6 share classes)
 Not all fund companies have zero revenue sharing options
 Share class efficiency becomes a major consideration
2. Quarter-end Balance
 Account snapshot
 Potential to game the system
3. Unitization / Comingled Funds
 Varying NAV, no ticker, less transparency, custom fact sheets
4. Average Daily Balance Method
 Good system, but not exact
5. Daily Accrual Method
 Most precise method available, allowing daily accrual on an individual and fund level
Differences Between Levelization Techniques
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Investment Option
Expense
Ratio
Revenue
Sharing
Investment
Management
Efficient?
Metropolitan West Total Return Bond M 0.690% 0.350% 0.340% Efficient
Metropolitan West Total Return Bond I 0.440% 0.100% 0.340% Efficient
Metropolitan West Total Return Bond Plan 0.390% 0.000% 0.390% NOT Efficient

18. For Institutional Use Only
Plan Sponsor Responsibilities
Excerpt from Field Assistance Bulletin 2003-3 (May 19, 2003)
“…ERISA contains no provisions specifically addressing how plan expenses may be allocated
among participants and beneficiaries…”
“…When the plan documents are silent or ambiguous on this issue, fiduciaries must select the
method or methods for allocating plan expenses. A plan fiduciary must be prudent in the
selection of the method of allocation. Prudence in such instances would, at a minimum,
require a process by which the fiduciary weighs the competing interests of various classes of the
plan’s participants and the effects of various allocation methods on those interests. In addition to
a deliberative process, a fiduciary’s decision must satisfy the “solely in the interest of
participants” standard…”
1. Plan Sponsors should determine how fees are allocated today
2. Document a prudent process for selecting an allocation method
3. Make a determination that the method selected is in the best interest of Plan participants.
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19. For Institutional Use Only
Disclaimer
Benefit Financial Services Group (BFSG) is a Registered Investment Advisor. These materials are provided for
general information and educational purposes based upon publicly available information from sources believed
to be reliable - we cannot assure the accuracy or completeness of these materials. The information in these
materials may change at any time and without notice. We are not soliciting any action based upon this
material. You should not assume that any discussion or information contained in this webinar serves as the
receipt of, or as a substitute for, personalized investment advice from BFSG. To the extent that a viewer has
any questions regarding the applicability of any specific issues discussed, you are encouraged to consult with
your professional advisor. BFSG is neither a law firm nor a certified public accounting firm and no portion of
the presentation content should be construed as legal or accounting advice. A copy of the BFSG current
written disclosure statement discussing our services and fees is available for review upon request.
The material contained herein is the work product of Benefit Financial Services Group (“BFSG”). It is for your
internal use only, and may not be published, disclosed, copied, or distributed without the express written
consent of BFSG.
This packet is intended for educational and informational purposes only.
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20. THANK YOU!
Contact us regarding our advanced Fee Levelization workshop
Christopher Rowey
(949) 955-3480
crowey@bfsg.com
Chad A. Noorani
(949) 955-3031
chadn@bfsg.com
www.bfsg.com