Recordkeeper

What a recordkeeper is

A 401(k) plan holds one pool of assets in trust, and the recordkeeper is the system that knows whose money is whose. Its typical jobs are:

• Receiving contribution files from payroll and posting money to each account.

• Carrying out participants’ investment elections and processing trades.

• Tracking money by source (pre-tax, Roth, match, profit sharing, after-tax) and applying vesting.

• Processing loans, withdrawals and rollovers.

• Providing statements, the participant website or app, and employer reports.

Recordkeeping is an administrative service. A recordkeeper is not a fiduciary just because it keeps records. It becomes one only for functions where it has accepted discretion in writing, for example by also serving as the 3(16) plan administrator.

Why it matters to employers

The recordkeeper is the provider you and your employees deal with most, and the quality of its payroll connection decides how much manual work lands on you. Selecting it is a fiduciary decision. ERISA requires you to understand its services and its compensation, including indirect compensation paid through plan investments, which the provider must disclose to you under the 408(b)(2) rules.

Recordkeeper, third-party administrator and custodian are three different roles. One company can perform more than one.

Common mistakes

• Choosing a recordkeeper on brand alone, without comparing services and total compensation.

• Not asking how payroll data flows and who fixes errors.

• Assuming the recordkeeper checks your payroll data for accuracy. It processes what it receives.

• Not knowing which fiduciary roles, if any, the recordkeeper has accepted.

• Skipping a periodic review once the plan is running.