REDEMPTION FEE Q & A

What is a redemption fee?

A redemption fee is a fee charged by some mutual funds if a fund is bought and sold again within the redemption fee period as defined by the mutual fund company.

What is the typical redemption fee period?

There is no typical redemption fee period. Some are 2 days, some are 30 days, some are 365 days, and everywhere in-between. Redemption fee periods vary among fund families and among funds.

What is the typical redemption fee?

Redemption fees range from 0% to 2%. Just like redemption fee periods, redemption fees vary by mutual fund family and by fund.

Why are there redemption fees?

Redemption fees exist to protect and encourage people to invest in mutual funds as long-term investors, because short-term investing in mutual funds increases the trading costs of the fund and impacts all the mutual fund shareholders. Further, redemption fees help re-coup trading costs if a mutual fund shareholder does hold the investment for a short period of time.

Who receives the redemption fee money?

In almost all cases, redemption fee revenue goes back to the shareholders of the fund to which the redemption fee was applied.

Is the redemption fee calculated on a first-in first-out (FIFO) method or on a last-in first-out (LIFO) method?

In most cases, redemption fees are calculated on a first-in first-out basis; however, in some cases a last-in first-out method is utilized. FIFO looks at the oldest (first) deposit to determine whether a fee applies. LIFO looks at the newest (last) deposit to determine whether a fee applies.

Do any of the mutual funds in my plan have redemption fees?

Some may, please review the information included on RPS’ Benefits Net website (www.rpsbenefits.com) or Benefits Hotline [(800) 909-4030] to determine which, if any funds have redemption fees. You may also contact your plan sponsor for a list of plan investments with redemption fees.

Do any mutual funds companies waive their redemption fees for qualified retirement plans?

Some, but not all, mutual fund companies have waived their redemption fees if the mutual fund is part of a qualified retirement plan investment line-up.

Where can I obtain more information about the redemption fees associated with my plan’s mutual funds?

You can obtain additional information about redemption fees in the fund’s prospectus. RPS’ Benefits Net website has direct links to on-line prospectus or you can request a prospectus from your employer.

How will I be notified if a mutual fund in my plan decides to implement a redemption fee?

RPS will update the Benefits Net website and Benefits Hotline voice response system to include information regarding any fund in your plan that has a redemption fee. Alternatively you can inquire with your plan sponsor or directly with RPS for this information.