401(k) Service Provider Infographic
View InfographicUnderstanding each 401(k) service provider’s role and responsibility is important to the success of your plan. In this overview, learn what is expected from a Plan Sponsor, Investment Adviser, TPA and Recordkeeper.
Plan Sponsor
Investment Adviser
Description:
- Oversees the plan and selects providers
- Legally must act in the best interest of the plan participants and their beneficiaries
- Follows the plan documents
- Selects, or hires someone qualified to select, the plan investments
- Pays only reasonable plan expenses
Description:
- Gives advice on investments within the plan
- Plan coordination
- Employee participation & education
Types:
- Personal financial advisers without meaningful 401(k) experience
- 3(21) Investment advisers offer investment advice on limited fiduciary protection
- 3(38) Investment manager makes investment decisions and takes liability for them
Typical Fee Arrangements:
- Some charge a clear and transparent flat fee
- Others are paid by the Record Keeper based on the products they recommend to businesses
- Fees can be found on the 408(b)2 disclosure and the Form ADV2
Third Party Administrator (TPA)
Bundled
Record Keeper
Description:
- Plan design
- Plan documents
- Annual compliance testing
- 5500 filing
- Some plans use a TPA, while others have the Record Keeper handle the plan administration
- Can provide a local presence and more hands on expertise for non-standard plans
Description:
- Tracks contribution sources
- Provides website access
- Provides statements
Types:
- Insurance companies
- Payroll companies
- Record keeping companies
- Brokerage firms
Bundled Arrangements:
A single vendor provides all recordkeeping and administration
Typical Fee Arrangements for TPAs and Record Keepers:
- Usually a baseline fee, a per participant fee, and ancillary fees
- Various fees are detailed on your 408(b)2 disclosure including: annual, per participant, plan assets, administration, group annuity fees and revenue sharing
- The plan participant fees can be found on the 404a5 disclosure
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