DOL Issues Advisory Opinion on Mutual Fund Fee Offsets

The Department of Labor (the "DOL") recently issued Advisory Opinion 2005-10A under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"). This advisory opinion addresses whether the receipt by a custodian bank of an individual retirement account ("IRA") of fees from mutual funds affiliated with the bank resulting from services provided by the bank to the IRA violates the prohibited transaction rules under Section 4975 of the Code. The factual situation presented in the advisory opinion involves a bank that provides a combination of services, including custodial services and investment advice, to IRAs under a managed portfolio account service program. Under the program, the bank provides investment advice to the IRA holder as to the investment of IRA assets in both affiliated and unaffiliated mutual funds. The bank and its affiliates do not receive any fees from the unaffiliated mutual funds, but