The U.S. District Court for the Western District of New York dismissed a complaint filed by Steven Zang against Paychex Inc. alleging ERISA violations by Paychex in accepting revenue sharing money from mutual funds Paychex chose for its prototype plans. Zang v. Paychex Inc., W.D.N.Y., No. 08-CV-6046L. Paychex sponsors prototype retirement plans and provides access to different mutual funds as investment options for those plans. Some of those mutual funds make revenue sharing payments to Paychex. Zang is the fiduciary and plan administrator of a 401(k) plan sponsored by his company, Luxon & Zang P.C., that is based on a Paychex prototype plan.
Zang alleged that Paychex breached fiduciary duties in receiving revenue sharing payments because it chose the mutual funds offered through its prototype plans. The Court ruled that Paychex is not an ERISA fiduciary because the plan sponsor ultimately chooses the mutual fund from the options supplied by Paychex, and the administrative services agreement stated that Paychex was not a plan fiduciary. The Court noted that even if Paychex played a role in Zang's decision by offering a set of options, the ultimate decision is made by the plan sponsor.