Services You Should Expect from Your 401(k) Provider

by Eric O’Donnell, Director of Retirement Product Development at Sentry

Whether you’re a plan sponsor, administrator, or both, you’re considered the fiduciary of your company’s 401(k) plan. This title comes with a lot of responsibility, but a good 401(k) provider can assist you in fulfilling those responsibilities.

A provider, generally known as a recordkeeper, handles participant data and accounts. This typically includes helping identify who’s eligible for your retirement plan and recordkeeping various aspects of the plan, such as participant deferral elections, contributions, participant investments, and distributions. A provider may also be tasked with:

• Producing quarterly participant account statements
• Producing tax reporting on distributions
• Offering resources and education for employees’ financial well-being
• Recording and distributing 401(k) loans and disbursements
• Updating you when the IRS or DOL announce regulation changes
• Producing participant notices required under federal regulations

Ensuring your 401(k) plan is legally compliant

One of your provider’s most important jobs is to help you ensure your plan is legally compliant. When changes are made to laws and regulations, your provider should communicate them to you—and clearly outline any steps you need to take. In general, you should rely on your provider to assist with:

• Conducting required annual compliance testing: The IRS requires plan administrators to conduct nondiscrimination testing annually to ensure retirement plans don’t unfairly benefit company owners or highly compensated employees.
• Preparing your Form 5500: The IRS and DOL require this form annually for all retirement plans. In part, this form helps document the financial health of your company’s 401(k) plan.
• Providing annual audit support: Generally, for plans with 100 or more participants with a balance on the first day of the plan year, you’ll have to undergo a legally required audit. Your company will need to provide documentation, such as payroll data and time-stamped communications to ensure your plan meets regulations.

What you need to do

While there are many tasks your 401(k) provider can help you with, there are some you’ll need to complete on your own or with another qualified entity or individual. Many times, your provider will have relationships with a qualified entity that’s integrated with their product offering to help you with tasks like:

• Giving investment advice to participants
• Taking fiduciary responsibility for the plan’s investment selection and monitoring
• Making plan design decisions
• Signing your Form 5500
• Assuming liability for contributions being timely and accurate
• Monitoring incomplete or missing participant data

A strong 401(k) plan can help you attract and retain talent—and help your employees meet their retirement goals. That starts with choosing a good provider, one that’s reliable, trustworthy, and can guide you through the ins and outs of serving as a plan fiduciary.

Eric O’Donnell is a director of retirement product development for Sentry Insurance. Sentry provides cyber liability, property, casualty, life insurance, and retirement products to dealers and other businesses. Learn more at sentry.com.