Mutual Fund Revenue Sharing in 401(k) Plans
69 Pages Posted: 31 Dec 2020 Last revised: 10 Nov 2022
Date Written: November 8, 2022
Recordkeepers in DC pension plans are often paid indirectly in the form of revenue sharing from third-party funds on the menu. We show that these arrangements affect the investment menu of 401(k) plans. Revenue-sharing funds are more likely to be added to the menu and are less likely to be deleted. Overall, revenue-sharing plans are more expensive as higher expense ratios are not offset by lower direct fees or by superior performance. Rebates increase with the market power of the recordkeeper suggesting that third-party funds may revenue share to gain access to retirement assets.
Keywords: 401(k) plans, retirement, providers, revenue sharing, mutual funds
JEL Classification: G23, J23
Suggested Citation: Suggested Citation