Compliance Solutions for Investment Advisers

ERISA 408(b)(2) – Indirect Compensation

One of the disclosure required of Advisers by the Department of Labor under ERISA section 408(b)(2) is in regard to indirect compensation. “Indirect” compensation is compensation received from any source other than the covered plan, the plan sponsor, the covered service provider, or an affiliate.

Examples of Indirect Compensation:

  • Soft Dollars;
  • 12b-1 fees (even if offset against fees);
  • Payments from entities Adviser manages and the Plan invests in (e.g., mutual funds, collective trusts); and
  • Conference sponsorships, sponsoring marketing events, gifts, tickets, trips.

The Adviser must identify not only the payer of the indirect compensation, but also describe the arrangement between the payer and the covered service provider, an affiliate, or a subcontractor, as applicable, pursuant to which such indirect compensation is paid.

 

line