(DATE)
Mr. ______
Director, Human Resources
______Company
Re: ABC Company 401(k) Plan
Dear______:
As a follow-up to our meeting on ______, this letter will outline the services XYZ Consultants, Inc., will be providing to ABC, Inc. (ABC). We appreciate the opportunity to be of service to ABC. We look forward to what is, hopefully, the first step in a long relationship together.
As we discussed, we will provide certain services and information pertaining to ABC’s 401(k) Plan and Trust (ABC Plan). You have indicated the desire to utilize Fiduciary Admin., Inc., as administrator and IJK Trust as custodian for the ABC Plan. Our services are independent of these vendors. We are not receiving any commissions or other compensation from any of these sources. You have provided us with a list of the mutual fund alternatives available to the ABC Plan through IJK Trust. Based on this information, we will provide the following services and reports to you:
1. We will review the mutual fund alternatives provided through IJK Trust. Based on our examination of these alternatives, we will narrow the choices down to three funds under each of the following investment objectives:
- Short/intermediate bond fund.
- Actively managed bond fund.
- Balanced fund.
- Equity growth fund.
- International equity fund.
Our list will be based on both objective performance criteria and subjective characteristics of the funds presented. We will then review this short list with you (and other members that are involved in the selection process) to arrive at the final fund to be used in each investment objective category.
2. After the selection of the final fund to be utilized for each investment objective, we will issue a letter to you documenting the selection process, the criteria used, and the rational behind the fund selection. This letter will satisfy ERISA guidelines in documenting that prudent procedures were utilized in making the selection. We will also provide you with historical return information on the funds selected so this information may be incorporated into the communications information you prepare for your participants.
3. We will also prepare an investment policy statement (IPS) for the Plan that reflects certain Plan characteristics, the funds selected, and the monitoring process that will be undertaken for the funds utilized. The IPS is required under ERISA and will satisfy the fiduciary duty you owe to ABC Plan participants in this area. The fee for preparing these items and meeting with you and the other members of your committee will be $______, payable 50 percent on delivery of the letter specified under item 2 above and 50 percent on delivery of the IPS under item 3 above. We understand that the letter to be prepared under item 2 is a high priority. We anticipate issuing this letter no later than ______, 200______, assuming we can meet with you and the other committee members on a timely basis.
As you may be aware, ERISA imposes a duty of supervision and monitoring once investment management choices have been made. Beginning with the quarter ending March 31, 200_, we will be glad to prepare a quarterly performance report for the ABC Plan that reflects the results obtained for each fund alternative selected. This will include rate-of-return data, any updated fund information we may possess, and comparative return information against the appropriate peer group. The initial fee to provide this data (for the quarters ending 3/31/200_, 6/30/200_, 9/30/200_, and 12/31/200_) would be $ ______per quarter. This quarterly report would include data on each of the five funds selected. The fee includes meeting with the committee each quarter.
For disclosure purposes,
1. We are, with this letter, providing you with a copy of Part II of our Form ADV that has been filed with the Securities and Exchange Commission, receipt of which is acknowledged by you.
2. All information furnished by either party to the other shall be treated as confidential and not be disclosed to third parties except as agreed upon in writing or as required by law. This does not preclude the disclosure of information to participants as part of normal participant communications.
3. Either party may terminate this agreement by providing the other party with written notice requesting termination.
4. Since our services are personal in nature, we may not assign the right to perform these services to any other party without your written consent.
Our services are designed to assist you in satisfying ERISA rules and regulation. We represent to you that the process we follow and the reports we issue are in compliance with current ERISA provisions, rules, and regulations. If this description of our services accurately describes the nature of our understanding, please sign in the place designated below and return a copy of this letter to me.
We are excited about being able to work with you in the selection of these funds for the ABC Plan. We think our services will be of enormous benefit to you and the Plan fiduciaries in evaluating and deciding on the investment choices. I look forward to working with you
Sincerely yours,
XYZ Consultants, Inc.
Agreed and Accepted:
ABC Company, Inc.
By: ______
Its: ______
Enclosure