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Who’s Who in Your 401(k)

Your 401(k) plan has a number of moving pieces and requires the coordination of several players to keep things running smoothly and operating in the best interest of plan participants. Here is a quick reference guide to help you sort through who’s who.

Plan Sponsor – this refers to the party responsible for creating and maintaining the 401(k) plan. Typically, this refers to the business owner, committee, or union leader. With discretion over plan decisions, plan sponsors have a fiduciary duty but can share in that responsibility with some of the other providers below.

Trustee – The trustee is responsible for the plan’s investments and for acting solely in the best interest of the plan’s participants. The trustees’ names are included in the registration of the plan documents/accounts.

Fiduciary – Any individual or entity with discretionary authority over a 401(k) plan's administration or investments. 401(k) plan fiduciaries ordinarily include the employer, trustees, and investment advisors.

Custodian/Recordkeeper – The custodian is responsible for moving money, paying plan providers, issuing statements, managing participant websites and safekeeping assets in a plan. A custodian does not provide investment advice, nor do they have a say in how the assets should or will be invested. The custodian/recordkeeper is also responsible for tracking how much you have, where it is invested, and what source your money came from.

Financial Advisor – Responsible for the investment recommendations, monitoring, and replacement of investment choices. Financial advisors are the face of the 401(k) for employees. They should be actively educating and assisting participants in saving and preparing for retirement. It is common for advisors to serve as a co-fiduciary with plan sponsors.

Investment/Fund Company – Investment/Fund Companies are in charge of selecting the stocks, bonds and other investments held within the overall mutual fund, ETF, or CIT available under the plan. Participants and plan sponsors do not typically have any direct interaction with the end investment company. Plan sponsors and financial advisors are responsible for the selection of the fund companies made available within the 401(K).

Third Party Administrator (TPA) – A third-party administrator operates as the accountant for the plan by handling official reporting and overseeing the consistent application of the rules outlined in a 401(k)’s Plan Document. Your TPA does the annual non-discrimination testing and filing of the 5500.


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