Custodians (and directed trustees) often maintain general accounts to facilitate the transactions of employee benefit plans. Typically, such accounts hold either contributions and assets pending investment directions or funds in connection with the issuance of a check to make a plan distribution or other disbursement. In regard to these accounts, the custodians often retain earnings, called “float”, from the short-term investment of funds held in these accounts. The Department of Labor, in Advisory Opinion 93-24A, stated that a custodian or trustee’s exercise of discretion to earn income for its own account from the float attributable to outstanding benefit checks constitutes prohibited fiduciary self-dealing. In a subsequent information letter, however, the DOL indicated that if a bank fiduciary openly negotiates with an independent plan fiduciary to retain float then the use of float would not be self-dealing. To avoid problems, banks were encouraged, as part of their fee negotiations, to provide full and fair disclosure regarding the use
of float on outstanding benefit checks.