401(k) Recordkeeper

I have a client - sole prop - that normally does a SEP. He had Obamacare this year and he is looking at an enormous repayment of PTC. The extra he could put into a 401(k) versus a would be sufficient to limit his repayment.

His financial adviser sent him loads of paperwork and she says she needs a letter from me to say that I will be the 401(k) recordkeeper. Isn't that a service she should be providing? I daresay I could keep the books, in theory, but I cannot go buying and selling investments. Would anyone here take on the record-keeping? It seems to be very inefficient for me to do it.

Any alternative suggestions would be much appreciated. As you will realize, time is of the essence.

Have you looked at a solo 401k?
https://www.irs.gov/retirement-plans/one-participant-401k-plans

Yes. That's what we are planning. The financial adviser wants me to keep records.

Try Fidelity or Vanguard...or somebody other than the financial adviser.
From the Fidelity website:

Appoint a Plan Administrator—someone who takes care of administrative responsibilities and ensures the plan is operating according to the Plan Document.

Because a Fidelity plan is easy to maintain, the employer usually acts as the Plan Administrator. You may also name another person at your firm, or your accountant, as the Plan Administrator

I would absolutely let the client be his own administrator, why take on the extra responsibility and risk?

The financial adviser wants me to keep records.

The plan administrator at the sponsoring company does not need to keep financial (dollar) records, just the occasional mandatory plan amendments to conform to ERISA law changes, etc. For a solo 401(k), it is quite normal for the company owner to serve as the plan administrator.

Maybe the financial advisor just wants to shed responsibility of any kind.

she says she needs a letter from me to say that I will be the 401(k) recordkeeper.

DO NOT accept that responsibility. You may become a fiduciary and that is not what you want! Check with your E&O carrier.

Thanks for all the concern but, after several e-mail exchanges, it seems that Makbo's comment is closest to the mark. She needs someone to make sure the contribution paperwork is in place and to file the Form 5500-EZ, should that ever be required.

Makbo, it is reasonable to assume that the FA wants to shed responsibility but, knowing the client, I think it is more a case of making sure that he does not do anything stupid. Not that he would. If in doubt, he calls me. I think the FA has less faith in his ability to operate a telephone than I do!

Yes. That's what we are planning. The financial adviser wants me to keep records.

For a small SoloK plan under $250,000, what records? That's the job of the custodian.

For a small SoloK plan under $250,000, what records? That's the job of the custodian.

As already described previously, the plan administrator needs to keep the plan document itself plus required amendments on file. I've had a solo 401(k) for about 13 years now, and in that time at least twice I've had to print and sign and file plan amendments to keep my plan in compliance with ERISA changes. The brokerage I use (T. Rowe Price) provides the materials to me to fill out, but ultimately I still have to take action by a particular deadline to keep my plan in compliance, not them.

I agree, but that does not sound like record-keeping to me.

For a small SoloK plan under $250,000, what records? That's the job of the custodian.

As already described previously, the plan administrator needs to keep the plan document itself plus required amendments on file. I've had a solo 401(k) for about 13 years now, and in that time at least twice I've had to print and sign and file plan amendments to keep my plan in compliance with ERISA changes. The brokerage I use (T. Rowe Price) provides the materials to me to fill out, but ultimately I still have to take action by a particular deadline to keep my plan in compliance, not them.

[snip]
His financial adviser sent him loads of paperwork and she says she needs a letter from me to say that I will be the 401(k) recordkeeper. Isn't that a service she should be providing? I daresay I could keep the books, in theory, but I cannot go buying and selling investments. Would anyone here take on the record-keeping? It seems to be very inefficient for me to do it.
[snip]

I would really suggest not taking on this responsibility, and here is why.

I have a client who started his 401(k) many years ago. During that time, he randomly kept or did not keep statements, and there are large gaps in his records regarding what amounts he contributed and when. He may be getting divorced, and knowing his contributions to the 401(k) is going to be very important when dividing up the large amount of money in the account. My QDRO expert has asked for every single 401(k) statement going back to the beginning, before the expert even starts calculating what each party would get. This is impossible. If someone had ever agreed to be the record keeper, my client or someone else could point the finger at them and say they should have kept all the statements for the entire period of time, and therefore they have to reconstruct what the statements would have shown, at no charge to the client. Without someone's agreement to serve as record keeper, it would be my client's responsibility to keep the statements, which is where that responsibility belongs anyway. I don't think anyone except a major corporation or the client should agree to be a 401(k) record keeper.

It also may affect professional liability coverage, because there are exclusions in many policies for contractual liabilities voluntarily assumed by the insured. It sounds like the financial advisor is looking to avoid responsibility and make you shoulder it without even getting paid for it. No thanks. If I were you, I would quote an exorbitant record storage fee because I suppose it could be worth it if the fee were high enough.