How are 12b1 fees calculated?
A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered to be an operational expense and, as such, is included in a fund’s expense ratio. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets.
Are 12b-1 fees revenue sharing?
The 401(k) industry calls it revenue sharing. The mutual fund industry calls it 12b-1 fees, subtransfer agency fees, shareholder servicing fees, and profit-sharing payments.
What are revenue sharing payments?
What Is Revenue Sharing? Revenue sharing typically refers to the compensation plan recordkeepers and service providers receive from mutual fund companies (or investment managers, affiliates, etc.) in exchange for assuming part of the mutual fund company’s administrative functions.
What is revenue sharing 403b?
In the typical case, the revenue sharing is being paid by the investments (and investment managers) to the recordkeeper for a 401(k) or 403(b) plan. And, in those cases, the money is part of the compensation of the recordkeeper for its services to the plan and the participants.
Do Vanguard funds have 12b1 fees?
All Vanguard mutual funds are no-load and have no 12b-1 fees. The firm does advertise but does not pay commissions to brokers or financial advisors who recommend its funds.
What are sub TA fees?
Sub-transfer agency (Sub-TA) fees: like the example above, a mutual fund company pays somebody else to perform a fee that that fund company charged for. Sub-TA fees pay for tracking and servicing you and your assets in the plan. These fees are generally included in a mutual fund’s expense ratio.
Do all mutual funds have 12b-1 fees?
Fortunately, not all mutual funds charge 12b-1 fees. Many broad-market index funds are low-cost, with annual fees under 0.25%. A growing number of investors are managing their own investments by using websites like Vanguard.
Can an investment adviser receives 12b-1 fees?
12b-1 fees get their name from the SEC rule that authorizes a fund to charge them. When an investment adviser receives 12b-1 fees or revenue sharing in connection with investments they recommend, a significant conflict of interest arises.
How do you calculate revenue sharing?
To calculate revenue sharing, take the amount of an individual’s contribution and multiply that by the percentage of revenue sharing that was set out.
What is a good revenue sharing percentage?
Revenue sharing percentage: 20% of their net profits.
What is a typical profit-sharing percentage?
The simplest and most common is known as the comp-to-comp method, where contributions are based on the proportion of an employee’s compensation to the total compensation of all employees of the organization. There’s no required profit-sharing percentage, but experts recommend staying between 2.5% and 7.5%.
Can an employer keep your profit-sharing?
Generally, these plans work as part of a retirement plan, to supplement any contributions that employees make as well as matching employer contributions. Money your company places in a profit-sharing plan is generally yours to keep, with a few exceptions.
What is a 12b-1 fee on shares?
Class B shares, which typically carry no front-end but charge a back-end load that decreases as time passes, often come with a 12b-1 fee. Class C shares usually have the greatest likelihood of carrying the maximum 1% 12b-1 fee. The presence of a 12b-1 fee frequently pushes the overall expense ratio on a fund to above 2%.
What is the functional equivalent of revenue sharing?
In effect, that crediting process is the functional equivalent of revenue sharing. As a result, disclosure would help plan sponsors and fiduciaries compare the revenue-sharing payments and credits and evaluate the conflicts for competing investments.
What happens if the revenue sharing exceeds the cost?
If the revenue sharing exceeds that cost, the excess is restored to the plan. If the revenue sharing is not enough to cover the costs, the plan usually pays the difference, and the participants’ benefits are reduced by the amount of that payment (although some employers may absorb those charges).
Who pays the 12b-1 and sub transfer agent fees?
For an insurance product (e.g., a group annuity contract), both the 12b-1 and subtransfer agent fees also are often paid to the provider. The insurance company provider retains those amounts to cover the costs of its recordkeeping and other services, and pays the broker through a separate asset charge.