Why does a 401(K) plan need a recordkeeping program?

Publisher: Madison Pension Services, Inc.

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Why does a 401(K) plan need a recordkeeping program?

There are still many companies that may be implementing a 401(k) plan for the first time. Still other companies have maintained a profit-sharing plan, where the plan’s assets were invested on a pooled basis that is adding a 401(k) feature for the first time. There are still other companies that sponsor a 401(k) plan but wonder why in the world they are told that they need a “recordkeeper” to track the assets in their 401(k) world. To many of these companies, the recordkeeper and their investment platform seems unnecessary and expensive. However, using a recordkeeping firm to track the assets in your 401(k) plan is a critical component in maintaining a successful 401(k) plan. In fact, there are many third party administrative (TPA) firms that will not take on the responsibility of providing TPA services without a recordkeeper being involved. Why is that?