When you start setting up a 401(k) for your company, you will begin to see that there are a lot of parties involved. You have a Financial Advisor, a Recordkeeper, and a Third Party Administrator. Each one of these parties plays an important role in running a successful 401(k).
It is uncommon, but occasionally we run across a company that is doing the 401(k) work manually, without a recordkeeper. One of the questions we get asked frequently is, “why do we need to hire a recordkeeper?” Although it is doable to go without, we do not advise setting up your 401(k) this way, and in this post, we are going to cover why.
The best way to explain this is to define roles. There is usually some confusion (we’ve had people ask us wait, Don’t you keep the records?, to which the answer is, No, that’s the recordkeeper’s function.) Here’s a simple breakdown of who does what:
Duties of 401(k) Advisor (like TrueNorth Retirement Services):
- Assist clients with choosing the best 401(k) design
- Set up the 401(k)
- Create and monitor the fund lineup (act as the 3-38 fiduciary of the plan)
- Ensure 401(k) plan continues to meet client needs
- Help employers choose the right Recordkeeper and TPA
- Provide 401(k) education for employees
Duties of a 401(k) Recordkeeper:
- Provide website and materials to make participant experience easier
- Process employee enrollment and produce education materials
- Manage and track employee’s investments (this includes trades and conversions)
- Log all contributions and keep track of what type they are (pretax dollars, rollover, Roth, employer match, etc.)
- Provide plan documentation to employees
- Manage employee withdrawals (hardship, leave a job, etc.)
- Provide customer service to participants
- Provide QDIA options in the fund lineup
- Print and mail account statements to participants
- Update processes as regulations change
We can assure you that using a recordkeeper will decrease your fiduciary risk, decrease the amount of administration work of a 401(k), and give your participants a significantly better user experience.
Helping You Find the Right Recordkeeper for Your Company
At TrueNorth Retirement Services, we will find the recordkeeper that best fits our client’s needs. If you have any questions about 401(k) plans, recordkeepers, or anything else, feel free to call TrueNorth Retirement Services at (801) 274-1768 or visit us online at https://www.truenorthwealth.com
