Description of Duties as a Record Keeper for a 401(k) Retirement Plan

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All employer sponsored retirement plans are closely monitored by the Internal Revenue Service and must meet specific criteria to maintain eligibility. As such, the IRS requires meticulous record keeping for plans such as a 401(k). Failure to meet these strict guidelines can result in the program losing its tax deferment status. Because the record keeper will have direct control over some of the aspects of administration and management of the plan, he assumes a fiduciary duty to ensure the participants are protected and the plan maintains compliance standards.

Provide Information to Employees

Each 401(k) plan must have a written plan, which outlines the specifics for the administration, benefits and features. The record keeper must provide a copy of this plan to each employee, including any investment options available. Without providing specific tax advice, each employee should be made aware of the tax saving benefits available through the 401(k) including the tax free contributions and employer matching option. Each employee also should fully understand participation guidelines and vesting calendars.

Monitor Expenses

Record keepers have a fiduciary duty to monitor and maintain tight controls over expenses of the plan. Not only does that mean ensuring that in-house expenses are controlled, but also that the plan will actively seek the most cost effective investment options for the participants. As seen in the case of Tussey vs ABB Inc., when these factors are not handled properly, the court will award the participants compensation to cover the negligence of the fiduciaries involved.


In order to maintain the tax saving benefits offered through a 401(k), the plan must meet the criteria of nondiscrimination. It must be made available to all employees, regardless of position. Each plan must pass an annual test to determine if the percentage of participation for lower level employees is in line with the participation percentage for the executive levels. If these numbers differ drastically, the plan may be deemed to be discriminatory. The record keeper must monitor participation to ensure compliance with this regulation.

Limit Liability

Employers and record keepers assume a large amount of liability when instituting these types of programs in a company. However, there are ways to limit the liability exposure. First, ensure that all information provided by the investment firm is carefully studied in a timely manner. Second, carefully evaluate investment options and fee structures with similar organizations to ensure that your company is not unfairly charged. Lastly, understand that not every investment will generate a positive return. As long as the investment is sound and was made to diversify the portfolio, you cannot be held responsible for fluctuations in the market.