Under ERISA (Employee Retirement Income Security Act), a 402(a) named fiduciary is the individual or entity designated in the plan document as having the overall authority to manage and control the operation and administration of a retirement plan.  This person or entity is essentially the “go-to” person for plan oversight and is responsible for selecting and monitoring other service providers and fiduciaries.  All qualified plans need to adhere to three regulatory components, Internal Revenue Code, ERISA, and the legal plan document.

Why Every 401(k) Plan Needs a 402(a) Named Fiduciary

In most 401(k) plans, the named fiduciary is the employer.  Employers have a fiduciary duty to regularly review their 401(k) providers, as they are ultimately accountable for acting in the best interests of their plan participants. This responsibility can feel daunting, as falling short could result in personal liability to make up for any preventable participant losses or the company having to pay substantial fines and penalties for an operational defect. Below are key responsibilities that plan sponsor burdens throughout the plan calendar year without 402(a) fiduciary services:

Administrative Responsibilities Without a 402(a) Fiduciary

Below are key responsibilities that plan sponsor burdens throughout the plan calendar year without 402(a) fiduciary services:

• Plan Operational Oversight & Compliance
• Plan Document Administration
• New Hire & Termination Processing
• Service Provider Selection & Oversight
• Participant Notices, Statement & Disclosures
• Plan Audit
• Participant Fee Disclosure
• Loan and Loan Repayments
• Contributions
• Government Filings
• Domestic Relation Orders
• Forfeitures and Suspense Accounts
• Corrections and E&O
• All Plan Review Process
• Compliance Testing

 Why 402(a) Fiduciary Services Are Growing in Popularity

You might be wondering why 402(a) fiduciary services are gaining traction today. One key reason is the rise of Pooled Plan Providers (PPPs) and Pooled Employer Plans (PEPs), introduced under the SECURE Act 2.0. These arrangements require a designated 402(a) fiduciary, making the service an essential part of the solution.

What Employers Still Manage With a 402(a) Fiduciary Appointed

When an employer appoints a 402(a) fiduciary, most administrative responsibilities are delegated. However, the employer still retains a few key tasks — such as overseeing the 3(16) and 402(a) named fiduciaries, approving the plan’s year-end date, and ensuring the accuracy of payroll files and census data.

How FiduciaryxChange Supports 401k Advisors and Plan Sponsors

Business owners are focused on running their business — and understandably so. Engaging a 402(a) plan fiduciary can significantly reduce their ongoing administrative fiduciary burden. FiduciaryxChange, a division of AmericanTCS, delivers a high-quality solution designed to meet this exact need. We’d welcome the opportunity to educate and tailor a proposal for your clients.  As a 401(k) advisor, having this solution in your toolkit is essential to offering complete fiduciary support.