"Revenue Sharing in 401(k) Plans"
Recordkeepers in DC pension plans often receive indirect compensation in the form of revenue sharing from third-party funds on the menu. We investigate whether these arrangements a_ect the investment options and the cost of 401(k) plans. We show that 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 o_set by lower direct fees or by better performance. Revenue sharing increases with the market power of the recordkeeper suggesting that these arrangements partially represent third-party fund payments for access to retirement assets.
*Co-authored with Clemens Sialm (University of Texas at Austin and NBER) and Irina Stefanescu (Board of Governors of the Federal Reserve System)