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Retirement Plans Take Teamwork

Retirement plans are the backbone of Americans’ dreams. They plan and invest not only their hard-earned dollars in their employer’s retirement plan, but also their dreams. Therefore, many professionals that are in the retirement plan industry do not take their positions lightly. These positions consist of financial advisers, third-party administrators (TPAs), recordkeepers, custodians, human resource and payroll departments of the plan sponsor, and the plan auditor. Each of these parties to the plan have a large impact on the outcomes of the plan.


Financial advisers can take on many responsibilities, ranging from getting the plan up and going, to continually serving the plan sponsor and their employees with investment advice. Retirement advisers can take on any or all the following responsibilities:

· Develop plan documents and consult on the plans overall design

· Select recordkeepers and TPAs through a request for proposal (RFP) stage, if considered necessary

· Perform activities related to an investment adviser, whom selects and monitors the plan’s mutual fund investments

· Advise the plan sponsor regarding compliance and any questions thereon

· Assist employees in their fund selections and any other financial advice (depending on the terms of agreement with the financial adviser)

· Assist with annual large plan audits and with Department of Labor (DOL) audits

· Provide the know-how of integrating the retirement plan with the recordkeeper and the plan sponsor’s payroll system, thus creating a streamlined process for adding employee deferrals to the plan’s custodian

· Any many more


Third-party administrators act as an organization that is contracted with the plan sponsor to assist with the day-to-day activities of the plan. The responsibilities of the third-party administrator include, but are not limited to:

· Amending and restating plan documents

· Preparing employer and employee benefit statements

· Assisting in the processing of all types of distributions

· Preparation of loan paperwork for plan participants

· Provide testing of compliance with all IRS non-discrimination requirements, along with plan and participant contribution limits

· The allocation of employer contributions and forfeitures (depending on plan specifications)

· Calculating participant vesting percentages

· Preparation of annual 5500 return and reports required by the IRS, DOL, or other governmental agencies


The recordkeeper is basically the bookkeeper of the plan. They keep the record of “who” owns “what.” The recordkeeper has the responsibilities of, but are not limited to:

· Process employee enrollment

· Manage and track participant investments on a participant level and plan level

· Tracks the contributions by type (Roth or pretax, employers, forfeitures, etc.)

· Assists in generating the plan documents that the employer needs to distribute to employees (including how the plan is administered and fee disclosures, which are generally mailed or emailed to employees)

· Manage and record the loans and distributions per participant

· Create and issue account statements to participants

While the recordkeeper and third-party administrator can offer many of the same services, recordkeepers typically do NOT:

· Offer investment advice

· Assist with plan design

· Sign the 5500 return for the plan

· Offer compliance assistance

· Assist with employee education and onboarding


The custodian of the plan, which the term “custodian” can get confusing at times, comes down to whether the first letter of “custodian” begins with an uppercase “C” or a lowercase “c.” The lowercase “c” is used to note that the financial institution that “holds” the assets of the plan is either in street name or physically, and they have the assets of the plan in their custody. In this case, the custodian usually has no fiduciary responsibility to the plan.

The uppercase “C” is used to note when the financial institution serves in the capacity of an IRS approved Custodian for retirement accounts. Brokerage firms and mutual fund companies must apply to the IRS to be approved to serve as a custodian. If the financial institution is a bank, it is usually already approved to serve in a Custodian capacity. There are other details that assist in the understanding the role of the custodian or Custodian, but the above should serve as general terms for the purpose of this article.


The human resource department of the plan sponsor is pivotal in the teamwork it takes to not only assist in the daily administration of the plan, but also in making employees aware that they can participate in the plan. Human resource employees have the task, depending on the agreement with the third-party administrator, of informing employees of their ability to join the plan when they meet the eligibility requirements (if any). The department also informs payroll of the amount/percentage that is to be pulled from the new participant’s wages and deposited to their account in the plan trust.


The auditor of the plan takes the necessary steps to ensure that plan is operating in accordance with the plan documents. While sounding broad, these steps include:

· Testing participant deferrals (ensuring that the deferral rate/amount chosen by the participant is pulled on the correct wage type as noted in the plan documents)

· Testing that distributions are distributed timely and calculated correctly (including forfeitures on participants that were not fully vested, if applicable)

· Loan testing (including the assurance that the interest rates on loans are reasonable, payments on loans are started at the correct times, they are not in default, and more)

· Testing to ensure employer match and other employer contributions are properly calculated and deposited to participant accounts

· Testing employee deferrals are remitted to the plan trust timely (within DOL guidelines)

· Ensuring that the proper disclosures are sent to the participants in a timely manner

· Testing the eligibility process and if employees that became eligible during the year under audit were notified

· Gaining an understanding of the controls in place that affect the plan and if they are in place

· Making recommendations to plan management regarding the processes and controls in place over the plan, or any other areas in the company that may adversely affect the plan

· And many others depending on the plan specifications

As one can see, there are many cogs in this machine known as a retirement plan. It takes all the parties noted above to ensure the plan is operating in accordance with the plan documents and participants’ assets are well protected. The management of a retirement plan should not be taken lightly by any of the parties involved. It takes constant communication with all parties so that participants’ retirement dreams are realized and adequately safeguarded.

Thanks to all of the parties involved in the retirement plan industry making an impact on American families and their dreams.

Pooler CPA Group, LLC

Known for their fixed 401(k) audit fees

Professional, friendly service from the founder

And the companions, known as the 401k.9s