Who is the Plan Administrator for an IRA?
Depending on what your investment goals are, you may require rolling your distributions from your 401(k) into an IRA account. In order to do this, it’s essential that you identify who the plan administrator is.
Plan administrators oversee the day-to-day management of retirement funds or pension plans. However, they don’t make investment decisions themselves.
Custodian
Custodians of individual retirement accounts (IRAs) are entities which hold title to assets/investments held within an account, such as banks, credit unions, savings and loan associations, trust companies or any other IRS-approved firm. Custodians may also assist with record keeping and investment management duties.
Custodians play an especially essential role for self-directed IRAs, which give investors greater control and flexibility in selecting investment options such as real estate or alternative investments like cryptocurrencies and precious metals. While custodians do not provide financial advice, nor conduct due diligence on investments they support investors by providing infrastructure support and compliance oversight.
When selecting a custodian, be sure they take security seriously and can protect both your assets and personal data. Make sure they have systems in place to prevent the loss of IRA assets as well as ensure employees do not gain access to this sensitive data. They should have an honest fee structure as well as be willing to answer your queries about fees.
Fiduciary
Administrators for Individual Retirement Accounts (IRAs) typically perform administrative duties like producing statements and performing basic reporting. They cannot, however, act as custodians of investment assets or money; some administrators may agree to take on fiduciary-level responsibilities for an additional fee, typically recordkeepers or TPAs who offer “3(16) services.”
ERISA defines who constitutes a plan fiduciary, which includes any individual providing investment advice for a fee on plan assets. Furthermore, plan administrators are expected to use diligence, skill, and prudence when selecting investments for their plan(s). Although trustees and/or Named Fiduciaries often bear this burden alone, they can delegate fiduciary duties to one or more investment managers in their portfolio.
Based on how an IRA is set up, either a fiduciary or non-fiduciary service provider may be necessary. NerdWallet writers are subject matter experts who draw upon primary and credible secondary sources when writing content for NerdWallet articles; additionally they use peer reviewed research studies, government websites and industry expert interviews as sources to ensure accuracy and relevance in their writing.
Facilitator
“Facilitators” in the context of self-directed IRAs refers to companies offering LLC services for self-directed accounts. Such facilitators typically charge fees to create LLC owned IRA accounts while offering guidance about investment decisions for account holders – a service particularly popular with real estate investors.
Although these companies provide excellent services, they should not be considered custodians in the strict sense. A true custodian must be registered and regulated, in addition to meeting IRS regulations for IRAs in particular.
IRA custodians must conduct audits and avoid transferring money to disqualified people such as spouses and children. Although many IRA custodians try to train their representatives to recognize legal parameters, they could overlook key details that could cause legal and tax issues; furthermore, sales representatives often feel pressured into selling services, leading them into potential conflicts of interest situations.
Advisor
Plan administrators can be named in your plan documents or they can be chosen through nomination by committee of trustees, company executive or an outside service provider to handle that function. With self-directed IRAs, usually brokers or investment firms handle this function for you – with precious metals managed separately.
Select a financial advisor with experience and a solid track record, such as certifications such as CPA or CFP. Avoid advisors that rely solely on marketing techniques instead of financial expertise. It is especially crucial that your advisor be knowledgeable of any alternative asset classes in which you intend to invest, such as real estate. A real estate expert would likely provide more comprehensive guidance than someone with only generalized planning skills; Ed Slott’s Elite IRA Advisor Group can assist with finding such individuals.
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