Revenue sharing policy
VALIC offers many investment options to investors for their retirement plans. It is essential for an employer to evaluate these options to select those that best meet the needs of the retirement plan and its participants. We currently offer a broad selection of investment options in our various products, including some of the largest and most well-known fund families. All fund families with whom we have selling agreements have access to our financial advisors to provide training, due diligence or continuing education programs, or other educational presentations and product information for better client service.
It is important for you to know that our financial advisors do not receive additional selling compensation in connection with a participant’s choice of investment options offered in the group mutual fund or annuity products. Therefore, there is no incentive for a financial advisor to suggest one fund over another to retirement plan participants.
Many fund families make payments to VALIC for service, marketing, and distribution. These payments, often called “revenue sharing,” are made by a fund or a fund’s distributor, investment adviser or other related entity, based on average assets invested in the mutual fund. The specific fees received for the major product lines are described below.
“Rule 12b-1 fees” refers to Rule 12b-1 of The Investment Company Act of 1940, which allows a mutual fund to pay fees to broker-dealers for fund distribution, marketing and service support. These fees normally range from zero to 0.35%, depending on the class of shares and the fund. In addition, funds may also pay finder’s fees of up to 1% for large purchases made within a specific time period. We may also receive payments from fund families for exhibitor booths at meetings and to assist with education of VALIC financial advisors.
Recordkeeping fees are paid by fund families for administrative services, such as individual participant accounting, customer service, printing and mailing account confirmations and statements, tax reporting, and regulatory mailings. The recordkeeping fees are paid on a per participant basis or a set percentage and usually range from zero to 0.50% or up to $12 per participant. Funds may choose to pay higher recordkeeping fees instead of 12b-1 fees.
Portfolio Director Fixed and Variable Annuity
VALIC receives an annual 12b-1 fee from the Ariel, Ariel Appreciation, and T. Rowe Retirement Advisor Fund series of 0.25%, calculated as a percentage of the total amount invested in each fund. Additionally, VALIC receives non-12b-1 service and recordkeeping fees for services provided to the American Beacon Bridgeway Large Cap Growth, Ariel, Ariel Appreciation, Invesco Balanced-Risk Commodity Strategy and T. Rowe Retirement Advisor Fund series, which range from 0.10% to 0.35%. VALIC uses all or a portion of these fees received to reduce the separate account charges for each contract owner and plan participant. The separate account charge will not increase even if the revenue sharing is no longer received.
Mutual Fund Platform
VALIC receives a plan administrative fee for the services provided to each retirement plan, which fees are generally deducted from participant accounts. Each plan sponsor reviews a list of mutual funds available as investment options in its retirement plan and selects those mutual funds for the retirement plan based on various factors, which may include the fund’s investment objectives, historical performance and fund expenses. Certain mutual funds selected by the plan sponsor may include fees and charges, such as 12b-1 fees that pay for distribution and/or other service fees that pay for recordkeeping, administrative or shareholder services. These fees, commonly referred to as “revenue sharing” payments, are paid by the funds (or its affiliates) to intermediaries, such as VALIC, that provide such services directly to fund shareholders.
Generally, revenue sharing payments received from mutual funds are handled in one of two ways at the plan sponsor’s election. One option available to the plan sponsor is referred to as “fee equalization.” In this scenario, the revenue sharing payments that VALIC receives from the mutual funds in which plan participants were invested during the period are returned to plan participants in an amount that is based on each participant’s actual investment in the fund. At the end of each quarter, VALIC charges an administrative fee to each participant account and, for those participants who were invested in a fund that pays 12b-1 or other service fees, the participant will receive a revenue sharing credit to his/her account based on the revenue sharing payments that he/she indirectly paid through his/her investment in the mutual fund. The amount of each participant’s revenue credit will depend upon the amount of his/her investment in mutual funds that pay 12b-1 fees or other service fees.
The second option available to plan sponsors is to use the revenue sharing payments received by VALIC to offset the plan administrative fee. In this scenario, VALIC will reduce the administrative fee payable by plan participants by the revenue sharing payments that VALIC expects to receive during the period, which results in an “adjusted administrative fee” to be paid by the plan participant. Thus, all plan participants directly benefit from VALIC’s receipt of revenue sharing payments. For example, if the plan administrative fee is 0.40% and VALIC anticipates that it will receive revenue sharing payments of 0.22% based on all assets invested in the plan’s mutual funds, the adjusted fee, which will be deducted from plan participant accounts is 0.18%.
Investors should carefully consider the investment objectives, risks, fees, charges and expenses before investing. This and other important information is contained in the prospectuses, which can be obtained from your financial professional or visit www.valic.com or call 1-800-428-2542 and follow the prompts. Read the prospectuses carefully before investing.
Securities and investment advisory services are offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and SEC-registered investment advisor.
Annuities issued by The Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc., member FINRA.
VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries VALIC Financial Advisors, Inc., and VALIC Retirement Services Company.
VL 15926-B VER 2/2016