What is a Recordkeeper and what do they do?

A record keeper is a person or organization responsible for maintaining accurate records of a retirement plan, including the plan's assets, contributions, and distributions. Record keepers are critical to the operation and management of retirement plans because they help ensure that the plan is being administered correctly and that participants' benefits are accurately tracked and paid out.

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There are many different types of retirement plans, including 401(k) plans, Cash Balance/Defined Benefit, and individual retirement accounts (IRAs). Each of these plans has specific rules and regulations that must be followed in order to remain in compliance with the law. A record keeper is responsible for ensuring that these rules are followed and that the plan's records accurately reflect its financial status and the benefits due to its participants.

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Record keepers may also be responsible for providing information and support to plan participants and answering their questions about the plan. They may also assist with the enrollment process for new participants and help participants understand their options for saving for retirement.

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Overall, record keepers play a vital role in the operation and management of retirement plans. They help ensure that the plan is administered correctly and that participants' benefits are accurately tracked and paid out, which is important for the financial security of employees in retirement.

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Who usually acts as a Record Keeper?

In a 401(k) plan, the record keeper is typically a financial institution. Often that record keeper works with a third-party administrator (TPA). The record keeper is responsible for maintaining accurate records of the plan, including the plan's assets, contributions, and distributions. They may also provide other services such as investment management, participant communication, and plan compliance.

Financial institutions that offer 401(k) plans often serve as the record keeper for the plan. These institutions may include banks, brokerage firms, mutual fund companies, and insurance companies. They may also offer a range of investment options for participants to choose from.

TPAs (like The Ryding Company) are specialized firms that work directly with record-keepers and other administrative services to retirement plans and are usually the best value. TPAs may be hired by the employer sponsoring the 401(k) plan or by the financial institution offering the plan. TPAs may offer a range of services such as plan design, compliance support, participant communication, and investment management.

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The dangers of not having a Record Keeper

Mishandling your company's 401(k) compliance can have serious consequences for both your business and your employees. Failing to follow the rules and regulations that govern 401(k) plans can result in significant fines and penalties, as well as damage to your company's reputation. It can also create confusion and uncertainty for your employees, who rely on their 401(k) plans for their financial security in retirement. Therefore, it is essential to have a reliable record keeper in place to ensure that your 401(k) plan is being administered correctly and that all necessary compliance requirements are being met. Don't risk the financial well-being of your business and your employees - make sure your 401(k) plan is in good hands.

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Penalties for non-compliance

Here is a list of potential penalties for non-compliance in a 401(k) plan:

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• Fines and penalties imposed by the Internal Revenue Service (IRS) and the Department of Labor (DOL). These can be significant and may be based on the severity of the non-compliance and the size of the plan.
• Loss of tax-favored status for the plan, which can result in additional taxes for the plan and its participants.
• Repayment of excess contributions and taxes, which may be required if the plan has accepted contributions that exceed the legal limits or if the plan has not followed the rules for tax-favored contributions.
• Legal action by the DOL or other government agencies, which can result in additional fines and penalties.
• Damage to your company's reputation and credibility, which can have negative consequences for your business.
• Confusion and uncertainty for plan participants, who may be unsure of their benefits or rights under the plan.

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This information is provided as general guidance and may be affected by changes in law or regulation. It is not intended as accounting or legal advice. If you have questions please reach out to our team.