Self-Trustee vs. Corporate Trustee for Your 401(k) Plan

Early in my career, I attended a three-day training in the Twin Cities for 401(k) plan administration. I met my niece one evening for dinner and she was shocked to hear that it took three days to train on 401(k) plans. I didn’t have the heart to tell her that I was attending a basic training!

Retirement plans are complicated to administer. As complicated as the laws are, it is challenging to learn the nuances of this industry while staying abreast of the ever-changing regulations and how to interpret them.

How does all of this tie into self-trustee vs. corporate trustee? While others may downplay the importance of having a corporate trustee, we believe it is critical to the well-being of your business and your retirement plan.

If you self-trustee your company’s retirement plan, you may not realize you are doing something wrong until it is discovered by a regulatory agency. Retirement plan regulations are complicated. You may actually have a huge problem before you even realize there IS a problem.

By utilizing the services of a responsible corporate trustee, you can rest assured that the duties will be carried out in a responsible manner and in accordance with the documents and regulations that govern your retirement plan.

The trustee of your retirement plan is named in your retirement plan document. Your trustee must act in a prudent fashion and solely in the best interest of the plan’s participants. Among their responsibilities, your trustee should:

  • Ensure that the plan is administered in accordance with the documents governing the plan, as well as government regulations
  • Review controls over the record-keeping process
  • Accept and review plan contribution activity
  • Have exclusive authority and discretion to manage and control plan assets
  • Authorize the amount, timing, and/or method of payment to participants or beneficiaries of the plan
  • Maintain full and accurate records of contributions, investments, disbursements, and other transactions
  • Maintain trust fund accounting to be used in the plan’s annual filings
  • Monitor employee eligibility
  • Ensure the availability of diverse investments so participants can minimize their risk
  • Ensure that the plan does not engage in any “prohibited transactions”
  • Administer the plan for the exclusive benefit of plan participants and beneficiaries
  • Receive notices of any action or claim against the plan.

Since a trustee has the ability to exercise discretionary authority over the management or disposition of the plan’s assets and may also have responsibility for the plan’s administration, they are considered a “fiduciary” of the plan. Fiduciaries can be held personally liable for losses suffered by plan participants as a result of breach of fiduciary duties.

A responsible corporate trustee can greatly reduce this threat by managing the regulatory aspects of your retirement plan responsibilities. This will give you peace of mind and allow you to concentrate on running your business. A corporate trustee most often serves as a “directed” trustee. This means that they will require instructions from the plan sponsor before they take any action in performing their duties.

No matter who serves as your trustee, they serve at the pleasure of the plan sponsor and can be removed at any time by amending your plan document.

All of us here in the Retirement Division at Heartland Trust Company place a great deal of importance in the services we provide. We attend many hours of training each year to stay up-to-date on current trends as well as industry and regulatory changes so we can be the best possible resource for you. At Heartland Trust Company, we are honored to serve as corporate trustee for the retirement plans we work with.

Monica Millette, QKA® - VP, Manager -- Retirement Services.Self-Trustee vs. Corporate Trustee for Your 401(k) Plan