As a plan administrator or sponsor, you have a fiduciary responsibility to closely monitor contracts with any outside service providers you use, including your plan recordkeeper. Specifically, you must ensure that the plan complies with the plan document and all ERISA and DOL rules and regulations.
Maximize Recordkeeping Services
When monitoring controls to evaluate recordkeeper contracts, consider the following suggestions for getting the most out of your plan’s recordkeeping services:
• Understand the terms of your service contract. Make sure you’re taking full advantage of all services that are included in your recordkeeping contract. Also, be sure you understand what services are not included in the contract so you have procedures and controls in place to cover them.
For example, while the recordkeeper might apply loan payments to participant loan balances, he or she may not be responsible for reconciling loans or keeping track of loan defaults.
• Determine the scope of your recordkeeper’s services. Your recordkeeper may or may not provide plan advisory services and be the custodian of plan assets. It’s important to understand all these relationships and the scope of services that your recordkeeper provides. You may decide to engage a separate plan advisor if your recordkeeper does not provide these services.
• Take advantage of co-fiduciary responsibility if your recordkeeper offers it. While this does not alleviate your ultimate responsibility as the plan administrator, it may be important to your plan’s structure and system of compliance controls. It may also provide an added level of comfort for plan trustees.
• Obtain a SOC 1 report. This report details the scope of the recordkeeper’s systems and focuses on the complementary user controls that should be in place at your organization. Ask your recordkeeper for a SOC 1 report every year, and make sure the complementary user controls are functioning as part of your annual plan monitoring procedures.
• Ask about the recordkeeper’s preferred timelines for obtaining information. Recordkeepers need to obtain a wide range of information from plan sponsors to ensure timely processing and reporting. Establish a timeline for your staff to submit information to the recordkeeper, and review reports throughout the year to make sure you’re in compliance with ERISA and DOL regulations.
• Complete the census report accurately and on time each year. Much of compliance testing and reporting that recordkeepers perform is triggered by and utilizes information from the census report. The census report also plays a critical role in plan audits, such as selecting samples for testing participant data and eligibility. Therefore, make sure you understand what to include in this report.
• Understand and utilize recordkeeper reports. Recordkeepers provide monthly, quarterly and annual reports to plan sponsors. You should use this information as part of your system of internal controls over financial reporting and compliance. This helps you identify operational errors and prohibited transactions before your annual plan audit so you can make corrections as soon as possible.
Reexamine the Relationship
The relationship with your plan recordkeeper is one of the most important ones you have with any outside service provider. It’s smart to reexamine this relationship from time to time to make sure you’re getting the most out of it.
Give us a call at 512.610.7200 if you’d like to discuss your plan’s recordkeeping services in more detail.