L-1 Q: Who should serve as trustee of a 401(k) plan's assets?

A: A trustee's job is to accept funds, manage them prudently and distribute them to beneficiaries. A plan sponsor can either choose individual trustees - usually the owners or officers of the business - or a single institutional trustee, such as an affiliate of a bank, insurance company or other financial institution.

L-2 Q: What is a fiduciary? -TOP

A: A Fiduciary is a person who exercises any discretionary authority or control over the management of the plan or its assets, or who is paid to give investment advice regarding plan assets. The definition depends on the functions a person performs and not on the person's title. Plan service providers such as actuaries, attorneys, accountants, brokers, and recordkeepers are not fiduciaries unless they exercise discretion or are responsible for the management of the plan or its assets. 

L-3 Q: What is a named fiduciary? -TOP

A: A named fiduciary is one who has the ultimate authority to control and manage the operation and administration of the plan. This fiduciary must be specifically named or clearly identifiable in the plan document so that participants or other interested parties such as the Internal Revenue Service (IRS) or the DOL will be able to identify who is responsible for the plan and will be able to address issues to that person. 

L-4 Q: What is the trustee's responsibility? -TOP

A: The trustee collects and holds plan assets in trust for the participants. The trustee will also be responsible for managing the plan investments unless the plan expressly provides that the trustee is subject to direction from a named fiduciary or an investment manager. 

L-5 Q: What is the role of the named fiduciary? -TOP

A: Every plan document must clearly identify one or more persons to be the named fiduciary for the plan. If there is only one named fiduciary, that person or entity will be considered a fiduciary for all purposes under the plan. If there is more than one named fiduciary, the named fiduciaries can allocate responsibilities among themselves. The purpose of the named fiduciary designation is to clearly identify to participants and government agencies who is primarily responsible for the plan.

L-6 Q: What is the role of the plan trustee?-TOP

A: All plan assets must be held in a trust, and a plan trustee must be named. The trustee holds plan assets and is usually responsible for managing the plan's investments, although this function can be subject to the direction of another fiduciary, an investment manager, or plan participants. The plan trustee is usually responsible for processing contributions and investment transactions, preparing financial statements, and disbursing funds to participants or to pay fees and expenses of the trust.

L-7 Q: What is the role of the plan administrator? -TOP

A: A plan administrator is responsible for determining who is eligible to participate in the plan, determining what benefits are due under the plan, and responding to benefit claims and appeals. Plan administrators also have responsibilities dictated under the Internal Revenue Code (Code) and Employment Retirement Income Security Act of 1974 (ERISA) as follows: 

1. Distribution of summary plan description, summary annual reports, and statement of vested benefits to participants and beneficiaries 
2. For plans with over 100 participants, engaging an independent qualified public accountant to audit the financial records of the plan 
3. Maintenance of plan records for at least six years
4. Determination of whether a domestic relations order is qualified and 
5. Providing a written explanation of rollover and tax withholding election options, as well as an explanation of tax options with respect to distributions to recipients. 

L-8 Q: Can an outside financial or legal entity (i.e. bank, law firm, CPA, trustee company, etc.) serve as trustee for a 401(k) ? -TOP

A: Technically the answer is "yes," but it is not typical or financially appropriate in today's small plan marketplace, because outside trustees add additional costs to the operation of pension plans without adding a benefit. Even with an outside trustee it is impossible for the employer to transfer any legal liability away from himself. The outside trustee will not reduce the employer's liabilities or responsibilities to the plan by one atom! In the past decade virtually all new small pension plans have been set-up to be self-trustee precisely because it is less expensive, and there is no benefit doing it differently.
Outside trustees typically charge 1/2 % to 1% of the plan assets per year for their services, which amount to inspecting investment statements and certifying their accuracy. With our 401k plans, monthly statements are sent to the plan participants and employer directly from the custodian investment companies; It is both inefficient and wasteful to pay an outside trustee to certify statements that originate from an SEC-regulated custodian such as a mutual fund investment company. 401(k) Pro plans are IRS-approved to be employer-trusteed. (The IRS has allowed retirement plans to be employer-trusteed since 1962) .

L-9 Q: Under law how long must plan administer or plan provider keep 401(k)-related records?-TOP

A: The requirement is that records must be retained for 6 years. Records used to compile information that is required to be reported under the reporting and disclosure rules must be preserved by plan administrators (and by actuaries, accountants and others who may be involved) for 6 years after the due date for filing the documents to which they relate (ERISA Sec. 107). These records must have sufficient detail to permit the necessary basic information and data to be verified, explained or clarified for accuracy and are to include vouchers, worksheets, receipts, and applicable resolutions.
Accidental destruction of records will not discharge the persons required to retain records from their statutory duty with regard to the purposes for which such records are required to be retained. Where persons required to retain records know or should know that such reconstruction is impossible, or possible only at an excessive or unreasonable cost, such persons would not be under a duty to reconstruct or attempt to reconstruct the lost or destroyed records.