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Keeping the pencil sharp on recordkeeping for 401(k) plans

The vast majority of 401(k) plans do not perform recordkeeping in-house. Because service levels vary widely for the types of companies that perform recordkeeping, it’s a good idea to periodically evaluate your plan’s needs. Recordkeeping is part of fee disclosure, and having a bid process proves your fiduciary responsibility for your plan.

Here are descriptions of types of companies that provide recordkeeping:

–          Third-party administrators typically also handle administrative duties.

–          Recordkeeping firms focus specifically on recordkeeping.

–          Bundled service providers, such as mutual funds or insurance companies, may keep records as part of their service, or may sub-contract the recordkeeping.

Services to request from providers:

–          Records of contributions and distributions

–          Coordination with payroll

–          Crediting of investment earnings

–          Monitoring of employee deferrals and after-tax voluntary contributions

–          Monitoring of employer matching funds, qualified non-elective and profit sharing contributions

When you understand the services and extent of service needed based on your investment choices and numbers of participants, whether the investments are pooled vs. participant-directed, you can select the level of recordkeeping that is best for your plan and keeps fees relevant. Keep in mind, too, that even if you don’t want to change recordkeeping providers, you may be able to negotiate lower fees per participant based on these various factors. The point is to stay on top of the process and function.

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