With reform looming, bank's asset management unit joins others in offering retirement plans so-called R6 option
J.P. Morgan Asset Management today launched a new share class for retirement plans that is free of 12(b)-1 fees.
The firm joins other providers who've made available their own versions of the share class, called R6, including American Funds, which launched an R6 share class in May 2009 and Principal Financial Group, which now offers the Principal Trust Target Date Collective Investment Funds in the R6 share class.
J.P. Morgan's new share class will be available for 18 funds for use by defined-contribution and defined-benefit plans, as well as Section 529 plans and discretionary investment management accounts.
Though the R6 shares won't have any 12(b)-1 or shareholder servicing fees, they will have an investment advisory fee and other fund expenses.
These new shares also allow the plans that use them to report mutual fund expenses separately from their record-keeping and administrative fees.
J.P. Morgan's introduction of the R6 share class comes as more attention is being paid by regulators to improving fee disclosure for 401(k) plans and participants, and as more plan advisers look to be paid on a fee-only basis.
The Securities and Exchange Commission has floated a proposal to revamp 12(b)-1 fees, and is currently in the process of sifting through more than 1,000 letters received during the comment period, which ended Nov. 5.
“It's a class that seems to be making accommodations for what could be the elimination of 12b-(1) fees,” said Tom Modestino, associate director at Cerulli Associates Inc. “Advisers should get paid on the work they do with the plans, and if that needs to change in an environment that's becoming more fee-only, then clearly the direction will go that way in the marketplace
Under the current SEC proposal, fund firms would be able to charge a “marketing and service fee” of up to 0.25%. Anything above that amount would be deemed an “ongoing sales charge,” which would be limited to the highest fee charged by the fund for shares without marketing and service fees.
The proposal also would allow fund companies to create a new class of shares through which broker-dealers could set their own sales charges on mutual funds.
