401(k) Service Providers

Geek Out!


The Plan Administrator’s responsibilities include the oversight of the plan’s Covered Service Providers (CSPs), which may include:

An important aspect of these fiduciary duties and responsibilities include understanding when a fiduciary, or Co-Fiduciary relationship exists between the plan and the Covered Service Provider and whether this “status” is intended or an unintended consequence.

Types of Service Providers

Service Providers that are frequently called upon to provide services to the plan include the following:

Investment Manager (Fiduciary Role)

Investment Adviser (Fiduciary Role)

Participant Investment Adviser (Fiduciary Role)

Custodian (Non-Fiduciary Role)

Third-Party Adminstrator a/k/a Recordkeeper (Non-Fiduciary Role)

Administration and Monitoring

Hiring Service Providers

When hiring any plan service provider, a fiduciary should evaluate a number of prospective vendors, thoroughly documenting the selection process.  One popular way of accomplishing this is by using a questionnaire, which may be prepared by the benefits committee or its advisor (for example, ERISA counsel retained by the benefits committee).

The questionnaire is typically broken down into sections, and asks questions relating to services provided, fees charged, the number of plans the service provider currently is serving, the size of their plans, the type of the plans, and other pertinent data.

Once the completed questionnaires have been received back from several bidding providers, they are often compiled into a chart format, so that the various service provider data can be easily compared.  Not only does this help facilitate the selection process, but it serves as a document that helps illustrate the diligence and care that went into the decision-making process.

Service Provider Agreements

Plan fiduciaries should ensure that their expectations from each service provider, as well as all other provisions, are well-defined within a written, executed services agreement.

Significant terms of such an agreement should include, among other things:

On-Going Monitoring

Once hired, the Plan Sponsor or Plan Administrator (or its designated responsible agent) has a continuing fiduciary duty to monitor the performance of the service providers throughout the duration of its contractual term.This includes such tasks as: