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In a 401(k) plan, several service providers are responsible for managing different aspects of the plan's expenses. The following are the most common types of expense management providers:
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Record Keeper: The record keeper is responsible for maintaining the plan's participant accounts, processing contributions and distributions, and providing participant statements. The record keeper may also provide investment options and tools to help participants manage their retirement savings. The record keeper's fees are typically based on the number of plan participants and the services provided.
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Third-Party Administrator (TPA): The TPA is responsible for plan administration, including compliance testing, reporting, and plan design. The TPA ensures that the plan meets regulatory requirements and ensures that contributions and distributions are processed correctly. The TPA's fees are typically based on the complexity of the plan design and the level of service provided.
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Financial Advisor: The financial advisor provides investment advice to plan participants and helps the plan sponsor select investment options for the plan. The financial advisor's fees may be based on a percentage of assets under management or a flat fee.
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Other Service Providers: Other service providers may include custodians, auditors, legal counsel, and other specialized vendors. Their fees may be based on an hourly rate or a fixed fee for specific services.
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Managing expenses in a 401(k) plan is essential to ensure that plan participants' retirement savings are maximized and regulatory requirements are met. The plan sponsor should carefully evaluate the fees charged by each service provider and negotiate fair and reasonable fees.