Who Is Responsible for Your Company's 401(k)?

Ask a business owner who is responsible for their company 401(k). You'll usually get a company name back. Sometimes the first name of a rep there.

Neither one is the answer.

This isn't a paperwork problem. Your plan is probably running fine. Money goes in, statements go out, the filing gets made every summer. The gap only shows up when you ask who is watching the plan as one thing instead of five.

Nobody can tell me what a retirement plan advisor does

I ask this a lot. Owners, controllers, office managers who have run payroll for twenty years. What comes back is a shrug, or "they picked the funds," or "someone came in and did an enrollment meeting once."

Fair enough. The title doesn't explain itself, and nobody hands you a job description when you start a plan.

It's easier to see from the work than from the title.

The work your 401(k) needs every year

Forget the org chart for a minute and look at what a plan needs someone to do, year after year.

Someone has to watch the investment menu against standards written down ahead of time. The default fund, where employees land when they don't pick anything themselves, deserves more attention than the rest of the menu.

The fees need checking against what other plans your size are paying. Reasonable is a comparison. There's no set number that makes a fee fine on its own.

Then there's the design. Eligibility rules and the match formula were probably set the year you started the plan and haven't been touched since.

Compliance dates have to be hit. And your employees need more than one meeting during onboarding.

Now put a company name next to each of those.

Your recordkeeper runs the plumbing. Your administrator does the testing and the filing. The custodian holds the money. The auditor looks back once a year to check that the numbers were right.

Each one is doing the job you hired them for. None of those jobs covers the other four.

The job that never got assigned

There's a difference between a plan where every task has an owner and a plan where someone is accountable for the whole thing.

That second one is a separate seat. On a lot of small and mid-sized plans, it's empty.

The person in that seat watches the whole field. They keep the providers in sync, so the payroll file and the plan document and the investment menu all say the same thing. They write down how decisions got made. They run a calendar, so reviews happen on schedule instead of when somebody finally asks.

That's a plan advisor. Picking funds is one piece of it.

Where the responsibility goes when that seat is empty

ERISA assumes somebody is watching the plan. It doesn't say who.

The Department of Labor puts it this way in its guide for employers: "Fiduciary status is based on the functions performed for the plan, not just a person's title." A fiduciary is someone legally required to act in the employees' interest. If you have real say over the plan or the money in it, you're one, for the part you have say over.

Read that again with your own plan in mind. If you're the one who approves the provider, signs off on the menu, and decides the fees look fine, you're already in that role.

The same guide says something else worth knowing: "Hiring a service provider in and of itself is a fiduciary function." Picking your recordkeeper was your decision to answer for, and the DOL expects you to look at that choice again on a regular schedule.

None of this means your plan is in trouble. The work has an owner either way. If you never hired it out, that owner is your business.

What changes once somebody is in the seat

Less than you'd expect, from the outside. A calendar. A written standard for the menu. A fee comparison on a schedule instead of whenever a competitor sends over a proposal. Notes that show how a decision got made, written at the time it got made.

What owners notice is that the questions stop showing up as surprises.

Next in this series we'll go provider by provider, because "my recordkeeper handles that" is the sentence that starts most of these conversations.

Common questions

Who is the fiduciary on a small company 401(k)?

Your plan document has to name at least one, and for a small business that's usually the company or an officer of it. Past that, ERISA treats anyone with real say over the plan or its money as a fiduciary, for the part they have say over. Your title doesn't decide it.

Isn't our recordkeeper handling all of this?

A recordkeeper tracks accounts, processes transactions and runs the employee website. That list is spelled out in your service agreement, and it doesn't include deciding whether the menu is any good, whether the fees are fair, or whether the design still fits your payroll. Those decisions stay with the plan's fiduciaries.

Our CPA reviews the plan once a year. Does that cover it?

An accountant reviewing the plan, or running the audit once your plan is big enough to need one, is checking backward that things were recorded correctly. That work matters, and it's a different job from watching the menu, the fees and the design through the year.

Nothing has gone wrong with our plan. Does this still matter?

ERISA looks at how you decided, not how it turned out. The question is whether somebody who knew what they were doing, being careful, would have done the same, and whether you can show it. A plan can run clean for years and still have nothing on paper about how its decisions got made.

What does a 401(k) plan advisor do?

Watches the investment menu against written standards, compares your costs to similar plans, reviews the design before each plan year, keeps a record of the review cycle, and runs employee education on a schedule. What sets the job apart is the scope. An advisor is responsible for the whole plan instead of one piece of it.

Can we hand the responsibility off entirely?

Part of it. Responsibility moves when discretion moves. Bring in a firm that takes discretion over the investment menu and that firm answers for those decisions. An arrangement where somebody only recommends and you approve leaves the decision sitting with you. What never transfers is choosing that firm in the first place and keeping an eye on it afterward.

Written byAustin Wolfe & Joe AndersonClearMind Capital · Workplace RetirementView bio →

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