Retirement Plan Provider Guide Workplace retirement plans can be complicated. The compliance rules, investments, reporting, tax forms, and terminology are enough to make any plan sponsor’s head spin. Even the roles of service providers can be confusing. Clients often ask our consultants, “what exactly does this provider do?” Fear no more. We prepared a retirement plan provider guide to help ERISA plan sponsors. Cut through your stack of business cards and get to the root of plan service functions. While not exhaustive, this guide summarizes key providers and their respective services. Remember - plan sponsors can in-source most retirement plan service functions. However, hiring experts when appropriate to do so, can be prudent. Accountant Accountants specializing in ERISA plans generally provide plan audit services. This is known as an Independent Qualified Plan Audit (IQPA). Every ERISA plan requires an audit. However, ERISA plans with fewer than 100 participants can be exempt from audit, if they follow certain rules and bonding requirements. Actuary Actuaries are always necessary in ERISA defined benefit pension plans. Actuaries consult on defined benefit pension plan design. In addition, Actuaries prepare the defined benefit plan valuation, determine the employer’s funding requirements, and certify plan benefits in the annual government reporting. Attorney Attorneys specializing in employee benefits are known as ERISA attorneys. ERISA attorneys counsel employers on plan designs. They can draft plan documents, amendments, and adopting resolutions. In addition, ERISA attorneys can provide guidance on complicated compliance matters or plan corrections. Attorneys can also represent plan sponsors before government regulatory agencies. Automatic Rollover Provider Generally, plan participants eligible for a benefit distribution request one by completing forms. What happens when participants eligible for benefit distributions do not complete such forms? Automatic rollovers address this issue. An automatic rollover distributes a participant's account from a workplace retirement plan into an individual retirement account (IRA) without participant action. An Automatic Rollover Provider maintains the IRA. The plan participant can work through the Automatic Rollover Provider to request an IRA distribution. Plans and Automatic Rollover Providers need to follow certain rules for these transactions. As an example, unless a plan is terminating, automatic rollovers can only be made if a participant's account balance is less than $5,000. Claims Processor When participants make claims for benefits, they do so through a benefit claims procedure. Claims Processors adjudicate benefit claims. As an example, suppose a retirement plan permits financial hardship withdrawals. A plan participant brings a financial hardship benefit claim to the Claims Processor. The Claims Processor determines whether the financial hardship benefit claim is valid and approves or rejects it based on the plan terms. The Claims Processor may also be involved in the benefit payment and disbursement process. Consultant/Advisor Plan Consultants/Advisors have a deep understanding of ERISA requirements. They advise plan sponsors on plan design, education, fiduciary governance, and procedural prudence. Many Plan Consultants/Advisors have securities licenses. In such instances they may be engaged to advise on plan investments, draft investment policies, evaluate investment menu suitability, and/or serve as plan co-fiduciaries. Custodian In retirement plan terms, this provider does not provide janitorial services. Rather, Custodians are chartered with the responsibility to safeguard retirement plan assets. Custodians are generally regulated financial institutions. Education/Enrollment Agent Retirement plan designs can vary among employers. If employees do not understand the benefits offered by their employers, why would they sign up? Education and Enrollment Agents provide documentation and explain the plan to employees. Education and Enrollment Agents also support participants with the plan's enrollment process. Investment Manager Investment managers make investment decisions with plan assets, based on the plan's investment policy. Paying Agent Retirement plans do not just accumulate funds. They also need to pay benefits to participants. Paying agents process benefit payments and generally handle the applicable tax reporting (ex. Form 1099-R, Form 945, Form 1096, and state returns as applicable). Plan Administrator Every ERISA Retirement Plan must have a Plan Administrator. Not to be confused with a Third Party Administrator (see below), the Plan Administrator has discretion over plan operations. The Plan Administrator interprets the plan's governing documents, may hire plan service providers, and may appoint other plan fiduciaries. Generally, the Plan Sponsor or representatives thereof, such as business owners or plan governance committee members, function as the Plan Administrator. However, plan sponsors can outsource this function to certain providers who will serve as the ERISA Plan Administrator. Most service providers which engage in this capacity disclaim responsibility for certain functions. Recordkeeper Plan Recordkeepers track all financial activity in a participant’s account. On each participant account, the Recordkeeper accounts for every penny contributed, invested, and distributed. Most Recordkeepers maintain a technology platform which provides online and mobile access to the plan. Most Recordkeepers provide comprehensive reports on plans and participants. Third Party Administrator (TPA) TPA Firms, also known as compliance administrators or contract administrators, provide management and compliance services to ERISA plans. They advise responsible plan fiduciaries of potential compliance issues and offer options to resolve compliance failures. TPA Firms generally consult with plan sponsors on plan design and often prepare government tax forms, such as Form 5500, Form 5558, Form 8955-SSA, etc. Many TPA Firms also support the benefit distribution process. Trustee ERISA requires plan assets to be held in trust. Accordingly, every ERISA plan must have at least one trustee. Trustees have responsibilities over plan assets in the trust and direct the movement of trust assets. Summary and Key Takeaway Naturally, services vary among providers. Some providers also offer more comprehensive services than others. To complicate matters further, providers may overlap plan functions. As examples, some: Actuaries may also provide 401(k) plan administration or recordkeeping services; Custodians may also provide corporate trustee and payment services; Consultants/Advisors may also provide education and enrollment services; Recordkeepers may also provide plan compliance, plan design, and other administration services; and/or TPA Firms may also provide plan documents services. So, how can a plan sponsor make sense of what is needed and who to hire? Many plan sponsors will never require separate providers for all the above functions. Other plan sponsors may have more complicated needs and require providers for service functions not listed. Plan service needs also evolve over time as a plan grows or as an employer's objectives change. We recommend plan sponsors start first by speaking with a trusted expert. The trusted expert may already provide other services to the plan sponsor, such as assurance, audit, financial, investment, legal, and/or tax. Ask the trusted expert for a connection to a retirement plan specialist. The trusted expert could be involved in the initial consultation and serve as an advocate for the plan sponsor. Good retirement plan specialists can analyze a plan sponsor's situation and make recommendations. The retirement plan specialist can advise on which service functions can be in-sourced, and which should be out-sourced. Often these initial consultations may be complimentary or inexpensive to the plan sponsor. Once plan sponsors have a good sense of their requirements, they can confidently engage the right providers for their needs.