The AICPA® Employee Benefit Plan Audit Quality Center has prepared this advisory to assist you as a plan sponsor, administrator or trustee in understanding the importance and benefits of establishing an effective monitoring program over service organizations that perform recordkeeping and reporting functions for your employee benefit plan. While this advisory specifically addresses service organizations that perform recordkeeping and reporting services, plan sponsors, administrators and trustees should consider how information in the “Selecting and Monitoring Service Organizations” section of this advisory may be useful in monitoring service organizations that perform non-financial functions for the plan.
A plan may use several service organizations such as trustees, custodians, investment managers and recordkeepers to perform various functions on behalf of the plan. The trustee is responsible for the safekeeping of the plan’s investments, while the custodian is the party that actually holds the plan’s investment securities. Often the custodian also is the trustee. The custodian performs investment functions such as collecting and distributing income and purchasing and selling securities. The plan also may use an investment manager who makes investment decisions and directs the custodian in the purchase and sale of securities. The recordkeeper usually is a third party administrator (TPA), and is responsible for activities such as accounting for participant accounts, valuation of investments, preparation of participant statements and processing distribution checks. If the recordkeeper is the TPA, it also is responsible for plan administration functions such as performing compliance testing, plan design, calculation and allocation of employer contributions, filing the annual Form 5500, Annual Return/Report of Employee Benefit Plan, maintaining plan documents and tracking employee eligibility. The recordkeeper is not responsible for the plan’s investments.
DOWNLOAD