401(k) Tips

Who is the record keeper for a 401k?

One of the key parties in a 401(k) plan is the recordkeeper. Find out who the 401(k) recordkeeper is, and their key functions.

3 min read

According to a 2019 recordkeeping survey by PlanSponsor, American recordkeepers manage a staggering $4.9 trillion of American workers' retirement savings. If you have a 401(k) plan through your employer, the contributions you make to your 401(k) are managed by a recordkeeper. Essentially, the recordkeeper owns the website where you log in to check your 401(k) balance. So, who is a recordkeeper and what exactly do they do?

A recordkeeper is the bookkeeper of a 401(k) plan, and they are responsible for tracking who is in the plan, what each participant owns, and any money going in or out. They track employees who are eligible to participate in the plan and also enroll new participants in the plan. The recordkeeper issues routine account statements, usually quarterly or annually, to the plan participants. They also maintain the website that participants log in to check their account balances and make transfers. 

Who is a recordkeeper?

A recordkeeper is one of the main parties involved in the management of a 401(k) plan, alongside an investment advisor and third-party administrator. Typically, a 401(k) recordkeeper is the bookkeeper of the 401(k) plan, and they keep a record of who is in the plan, the investments each participant owns, and the money flow in and out of the 401(k) plan.

The recordkeeper is a passive player, and 401(k) participants may not know who their recordkeeper is. This is because recordkeepers rarely identify themselves as such, but employers may be aware of who the recordkeeper is. To check your plan’s recordkeeper, check your account statement to know the company that issues the statement.

What does a 401(k) recordkeeper do?

Some of the functions that a recordkeeper performs include:

Employee enrollment

The recordkeeper keeps a record of employees who are eligible and enroll to participate in the 401(k) plan. They also provide enrollment and educational materials to participants.

Track employee investment

The recordkeeper buys and sells mutual funds on behalf of the plan. They know how much each participant has invested, what they earned, and the money going in and out of each participant’s account.

Log type of contributions

When you contribute to the 401(k) plan, the recordkeeper logs whether the retirement contribution is pre-tax, Roth contribution, employer’s match, etc.

Manage 401(k) withdrawals

The recordkeeper maintains a record of any monies taken out of the participant’s retirement account in form of a hardship withdrawal or 401(k) loan.

Issue 401(k) statement

The recordkeeper is responsible for printing and mailing routine account statements to participants.

Maintain website

The recordkeeper is required to provide a web portal where 401(k) participants can check their balances and initiate transfers.

Customer support and guidance

The recordkeeper must maintain open lines of communications to handle employee and employer queries and complaints. They may also provide free calculators and other retirement savings tools to participants

What is NOT the role of a 401(k) recordkeeper?

A recordkeeper is not required to perform the following functions:

Offer investment advice

The recordkeeper does not offer investment advice to individual participants or help them achieve their retirement goals.

Ensure IRS compliance

The recordkeeper does not monitor the plan’s compliance with IRS requirements, non-discrimination compliance, or other government requirements.

Data audit

If you send the wrong data, the recordkeeper is not responsible if the data is recorded incorrectly.

Design the plan

The recordkeeper only acts as a bookkeeper and is not responsible for creating the 401(k) plan.

Employee education

Although the recordkeeper is responsible for employee enrollment, they are not responsible for educating employees on plan benefits or employee onboarding.

How Recordkeepers Get Paid

Generally, recordkeepers charge a fee for the services offered to the 401(k) plan. This fee can be an asset-based fee, a flat fee, a per-participant fee, or a combination of these fees. Asset-based fees are charged depending on the size of an employee’s investments, and they may be quoted as a percentage. With flat fees, the recordkeeper may charge a periodic fee, either monthly or quarterly, as a recurring cost. The fee may be deducted from the participant’s account or as a mutual fund expense ratio.

Who pays 401(k) Recordkeeping Fees?

Recordkeeping fees may be paid by either the employer or the employee.

The employer may opt to pay the recordkeeping fees to lower the plan investment costs for employees. Also, if the recordkeeping fee is a deductible expense, the employer may offer to pay this expense to get the tax break. Usually, if the employer pays this fee, they will write a quarterly or annual check out of the fund bank account.

The plan may also pass the recordkeeping fees to employees. Usually, these fees may be deducted directly from the employee's balance, or indirectly as a mutual fund expense ratio. The recordkeeping fee may appear in your 401(k) statement as a line item. If you don't see any recordkeeping fees in your account statement, it could be among the hidden fees charged to your account-

Who is my 401(k) Recordkeeper?

Recordkeepers are passive players in 401(k) plan management, and they rarely identify themselves. If you want to know the top recordkeepers in the United States, check out this list of top 401(k) providers to know who manages the 401(k) plans of the top US companies. You can also check your quarterly 401(k) statement to know the company that prints and issues the statement.