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The Three Tiers of Recordkeeper Revenue

What your recordkeeper RFP needs to capture, and why the disclosed number is only the start

Nate Moody, CPFA  |  Senior Financial Advisor & Partner  |  June 2026

Here’s a question most plan sponsors may not routinely ask: how does your recordkeeper actually make money on your plan?

Most people answer with the number on the fee disclosure. The per-head charge. The basis points on assets. That number is real, and it matters. But it may be only one component of what a recordkeeper earns from your plan. The rest may be reflected elsewhere in disclosures, described in general terms, or arise through arrangements not always captured in a simple stated-fee comparison.

When you run a recordkeeper RFP, the goal isn’t only to compare the lowest stated fee. It’s to evaluate the total cost your plan and participants may bear. Those numbers may differ depending on plan design, provider contract, investment menu, participant behavior, and affiliated revenue arrangements. A provider that quotes a low explicit fee can still be the most expensive option once you account for everything else they collect. Quantifying the totality of recordkeeper revenue is one of the most important things an RFP can do, and it’s often where RFPs fall short.

Recordkeeper revenue comes in three tiers. The first two show up, in some form, on your disclosures. The third usually doesn’t. Let’s walk through all three.

Tier 1: Explicit fees

This is the tier everyone knows. It’s the recordkeeper’s stated price for doing the job, and it’s the cleanest, most transparent revenue they collect.

Explicit recordkeeping fees come in two structures, and many plans pay a blend:

• Asset-based fees: A percentage of plan assets, quoted in basis points. A plan paying 0.15% on $20 million sends the recordkeeper $30,000 a year. The dollar figure grows automatically as the plan grows, even though the work of recordkeeping doesn’t.
• Per-head (per-participant) fees: A flat dollar amount per account, often $25 to $75 per participant per year. This tracks more closely to the actual cost of servicing an account.

Both are disclosed. A plan sponsor reviewing a 408b‑2 disclosure can find the recordkeeper’s direct compensation and the formula used to calculate it.¹ Costs charged directly to the plan are typically allocated to participants either pro rata (as a percentage of each account balance) or per capita (the same flat dollar amount to every account).²

What to watch in the RFP: Ask for the explicit fee both ways, as basis points and as a hard dollar figure at your current asset level. Then ask what happens to that number as assets grow. An asset-based quote that looks competitive today can balloon over a decade of contributions and market growth while the service stays the same. This is the easiest tier to compare across providers, so make them compete on it directly.

Tier 2: Transaction fees, managed accounts, and proprietary product revenue

The second tier is where revenue starts to spread out and get harder to total. These sources are generally disclosed somewhere on your 404a‑5 or 408b‑2, but they’re scattered, formula-based, and easy to overlook. Most plan sponsors never add them up.

Individual transaction and service fees

These are charges hung on specific participant activity rather than spread across the whole plan. Loan origination and maintenance fees. Distribution and withdrawal processing fees. QDRO processing. Overnight check delivery. Paper statement fees. They appear in the “individual fees” section of the 404a‑5, separate from the plan-wide administrative fees.³ Individually they’re small. Across a participant population over a year, they add up to real recordkeeper revenue.

Managed account fees

Many recordkeepers offer a managed account service that charges participants an extra layer, often 0.25% to 0.50% on top of fund expenses, to have their account professionally allocated. When the recordkeeper owns or co-owns that managed account program, this becomes a meaningful revenue stream that grows with every participant who opts in or gets defaulted in. The fee is disclosed, but it sits with the participant, not the plan, so sponsors frequently leave it out of their cost analysis entirely.

Proprietary funds and spread revenue

This is a significant area to evaluate in tier two, and it’s where some insurance-affiliated and bank-affiliated recordkeepers may earn additional compensation. When the menu includes the recordkeeper’s own proprietary funds, stable value products, or fixed accounts, the recordkeeper earns on the product in addition to (or instead of) the recordkeeping fee.

The clearest example is spread revenue on a fixed or stable value account. The recordkeeper credits participants a stated rate, invests the underlying assets at a higher rate, and keeps the difference. That spread is the recordkeeper’s compensation, and it typically isn’t itemized as a “fee” on standard disclosures because it’s structured as a crediting-rate differential.

This dynamic is evolving in ways sponsors should understand. As excessive-fee litigation has made traditional revenue sharing less popular, some providers have moved toward co-manufactured target-date series that carry a brand-name glide path but route a large share of the fixed-income sleeve into the recordkeeper’s own stable value fund. The stable value fund becomes a potential revenue source that may offset or supplement more visible recordkeeping fees.⁴ In retirement-dated portfolios, that can mean a large slice of a participant’s money sitting in a product the recordkeeper profits from directly.

What to watch in the RFP: Ask every provider to disclose, in dollars, all indirect compensation they expect to earn from your plan: revenue sharing (12b‑1 and sub-transfer agency fees), proprietary fund revenue, managed account fees, and the spread on any fixed or stable value product. Then ask the question that matters most: does the recordkeeper require, default to, or financially favor its own proprietary products? If the low recordkeeping fee depends on participants holding the house stable value fund, that’s not a low fee. It’s a fee collected through a different door.

Tier 3: The revenue that may not be captured in the headline fee comparison

The third tier is the one many RFPs may not fully quantify, because it may be outside standard participant fee summaries, difficult to isolate, or dependent on provider-level arrangements. These are real economic benefits the recordkeeper derives from servicing your plan and your participants. They don’t reduce your stated fee, and they create conflicts of interest you should understand before you sign.⁵

Float income

When participant contributions or distributions are in transit, they often sit briefly in an omnibus bank account before being invested or paid out. The interest earned during that window is float. In a higher-rate environment, float income can be substantial. Some recordkeepers retain it as indirect compensation, some share it with the plan, and a few credit it back to participants. Without oversight, float becomes a potential indirect economic benefit that plan fiduciaries may wish to evaluate with counsel and other advisors as part of their fee-review process.⁶

Platform and shelf-space fees

To get onto a recordkeeper’s open-architecture platform, third-party fund companies frequently pay for access. These are sometimes called shelf-space, platform, or data fees, and they’re paid by the fund company to the recordkeeper for platform access or related services. Such arrangements may create a potential conflict because a recordkeeper may have a financial incentive to favor the funds that pay to be there, and to steer your menu construction toward them. This revenue rarely shows up as compensation tied to your specific plan, so it’s nearly impossible to find in your disclosures.

Cross-selling and rollover capture

Your participants are an existing participant population for the recordkeeper’s other products: IRAs, retail brokerage accounts, wealth management, insurance, and banking. For many providers, rollovers can be an important business opportunity. When a participant leaves or retires, the recordkeeper that already holds the account and the relationship is positioned to capture those assets into a proprietary IRA. The IRA rollover market runs in the hundreds of billions of dollars annually, and a recordkeeper that converts even a fraction of your departing participants earns far more on the rollover than it ever did on recordkeeping.⁷ Some providers also “sell” tranches of small forced-out balances (safe harbor IRAs) to other providers.⁸

None of this reduces your plan’s fees. It may not always be in a participant’s best interest if the rollover results in higher costs, fewer services, or less favorable features than the in-plan option.

Other tier-three sources to ask about

• Forfeiture and unallocated account earnings: Interest earned on suspense, forfeiture, and error-correction accounts while balances sit waiting to be applied.
• Uncashed and abandoned check earnings: Interest on the pool of distribution checks that are issued but never cashed.
• Data monetization and lead generation: Aggregated participant data used to market the recordkeeper’s own and affiliated products, or to generate advisory leads.
• Affiliate and custody revenue: When the recordkeeper, custodian, trustee, and asset manager are all the same corporate family, revenue is earned at every layer, not just the one you contracted for.
• Vendor and conference subsidies: Payments from fund companies and TPAs that defray the recordkeeper’s costs and effectively subsidize its pricing.

Putting it together: the three tiers at a glance

Tier	Revenue sources	Disclosure
1. Explicit fees	Asset-based fees; per-head participant fees	Disclosed
2. Embedded & product	Transaction/individual fees; managed accounts; proprietary funds; spread on fixed/stable value; wrap fees; revenue sharing	Disclosed, but scattered
3. Undisclosed	Float income; platform/shelf-space fees; cross-sell & rollover capture; uncashed checks; data monetization; affiliate revenue	Largely undisclosed

The Bottom Line

A recordkeeper RFP that compares only the stated fee is comparing only part of the overall compensation picture. The provider with the lowest headline number may not always represent the lowest total cost once you account for product spread, proprietary funds, float, and rollover capture. Your job, and ours as your advisor, is to surface the total economic relationship and judge whether it’s reasonable for what the plan actually receives.

When you run your next recordkeeper search, build the analysis around the totality of revenue:

1. Require all-in revenue disclosure. Ask every finalist to quantify, in dollars at your current asset level, all compensation across all three tiers, including indirect and affiliate revenue.
2. Convert basis points to dollars. Translate every asset-based and embedded fee into a hard annual figure so providers compete on the same terms.
3. Interrogate the products. Identify any proprietary fund, stable value, or fixed account, and ask how the provider profits from it and whether the plan is required or defaulted into it.
4. Ask the tier-three questions directly. How is float handled? Are there platform or shelf-space fees? What is the rollover and cross-sell model for departing participants?
5. Benchmark total compensation against the market. Reasonableness under ERISA is measured against what comparable plans pay for comparable service, not against the provider’s own quote.
6. Memorialize it. Document the full revenue picture and your reasonableness conclusion in your committee minutes. That record is a core part of your fiduciary documentation.

If you’d like help running a recordkeeper RFP that captures the full picture, or a second look at what your current provider is really earning on your plan, we’re glad to talk it through. This is the analysis we do for plan sponsors regularly, and it may surface costs that weren’t previously on the committee’s radar.

This article is provided for informational and educational purposes only and should not be construed as legal, tax, or investment advice. The information is based on publicly available sources believed to be reliable as of June 2026, but accuracy and completeness are not guaranteed. Recordkeeper fee structures and revenue practices vary by provider and contract, and the categories described here may not apply to every arrangement. Readers should review their own plan’s 404a‑5 and 408b‑2 disclosures and consult with qualified legal counsel, tax advisors, or plan consultants before making decisions based on this information. This article does not constitute a recommendation to buy or sell any security or to adopt any particular investment strategy.

Securities offered through Valmark Securities, Inc. Member FINRA/SIPC. Advisory services offered through Valmark Advisers, Inc., a SEC-registered investment advisor. Lebel & Harriman Retirement Advisors is a separately owned entity from Valmark Securities, Inc. and Valmark Advisers, Inc.