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As discussed in our last blog article, there are many people who work behind the scenes to help manage a 401(k) plan. There’s the Investment Advisor, Third Party Administrator (Benefit Equity, Inc.), mutual fund companies, and a recordkeeper, (insurance company or investment company). 

The 401(k) recordkeeper is the investment custodian who buys and sells the mutual funds as directed by plan participant’s. In this role they account for the buying and selling of the funds, the contributions to the plan and the distributions to terminated employees. They are the bookkeeper for 401(k) plan. They also provide enrollment materials, participant disclosures, online access of account information and retirement planning tutorials. 

What else should you know about recordkeepers? Here are a few frequently asked questions we get about the role of the recordkeeper.

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In Robert Gorelick’s book, America’s Retirement Plan, Chapter 3 discusses parties to the Plan. There are a lot of different parties to the plan known as service providers. They work behind the scenes to help manage a 401(k) plan. There’s the Investment Advisor, Third Party Administrator (Benefit Equity, Inc.), mutual fund companies, and a recordkeeper, (insurance company or investment company). 

According to PlanSponsor Magazine’s 2016 Recordkeeping Survey, 401(k) recordkeepers hold $4.2 trillion of American’s retirement savings.  We also refer to them as the recordkeeping platform.

So what exactly does a 401(k) recordkeeper do? And just as important, what don’t they do?

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To assist employers with plan compliance, the Internal Revenue Service (IRS) recently released information detailing common 401(k) plan mistakes. Why eleven and not ten. Well, it’s the government so don’t ask.

In this guidance, the IRS provides a summary of the eleven errors as well as information regarding how to identify each issue and correction methods to use. 

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Right on the heels of a making profit in your practice or company comes a retirement plan. The most common is a Simplified Employee Pension Plan more commonly known as a SEP. Companies with more than two or three employees usually opt for a 401(k) profit Sharing combination. Professionals and executives not satisfied with the government limitation of $59,000 on these plans can now save $200,000 or more a year.

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The new tax law passed recently surprised many of us involved in the creation of retirement plans, as only a few changes apply or will actually affect retirement plans in the end. This was a bit of a pleasant shock because when it comes to government debt reduction, retirement plans have always been firmly on the chopping block. 

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