Who is the Plan Administrator for an IRA?
As an IRA owner, you may wonder who oversees your retirement savings account when taking distributions or asking about fees and charges.
Your plan administrator depends on the type of IRA account, but what exactly are their responsibilities? Here is a breakdown of their roles – Plan Administrator, Facilitator and Custodian.
Custodian
Custodians are IRS-approved entities that hold title to an IRA’s assets and investments, such as banks, credit unions, savings and loan associations or trust companies. Custodians should offer various services ranging from reporting and filing requirements to maintaining data records. In the case of Self-Directed IRAs it’s essential that a custodian understands regulations, offers an extensive range of investment choices and can answer queries about transactions – both legal and illegal ones – online or via telephone for answers about transactions both legal and unlawful ones.
Ideal custodians should also possess expertise in holding alternative assets like real estate and precious metals in an IRA, so as to verify account statements such as asset prices or prices/asset values. Furthermore, this helps avoid prohibited transactions by making investments under your direct control and performing IRS-required audits/reviews; some custodians such as Pacific Premier Trust specialize specifically in Self-Directed IRAs with alternative assets such as real estate.
Facilitator
As with any service provider, Self-Directed IRA service providers offer various levels of expertise and risk. A custodian offers the highest level of service; their regulation at both state and federal levels provides comfort and trustworthiness; they can perform various ministerial duties such as reviewing loan requests, setting repayment withholdings in payroll systems and assuring seamless data flow between plan systems and payroll systems.
Some of these functions are fiduciary in nature (for instance, performing nondiscrimination testing). Plan sponsors can carry out these duties themselves or delegate this responsibility to third-party facilitators who promote IRA-owned LLCs for a fee, before passing over ownership to an administrator for account administration. Facilitators also assist IRA owners with filling out paperwork necessary to establish their LLC and may provide advice about investing in alternative asset classes like real estate and precious metals.
Administrator
An administrator of an Individual Retirement Account (IRA) oversees its daily operations as an investment fund or pension plan, collecting and dispersing contributions according to stated goals of the plan’s participants. They do not make investment decisions but instead act as a third-party contractor with specific skillset.
3(16) administrators provide various fiduciary duties, such as daily administration, nondiscrimination testing and tax reporting. Depending on their level of involvement they may also advise on plan design.
Administrators often charge fees for their services, which will be deducted directly from a participant’s account. It’s essential to review your service agreement to identify any limits or additional charges beyond those limitations, since any unintended fees could be passed along as higher investment costs or reduced returns; often these will also be passed onto investors through higher costs or reduced returns; additionally they monitor investment alternatives and service providers to make sure that they remain suitable choices.
Self-Directed
Self-directed IRAs provide investors who distrust traditional retirement account options with greater freedom and investment options, including real estate, development land, promissory notes, tax lien certificates and precious metals. Custodians cannot offer advice; all transactions must be carefully researched by each investor prior to being completed.
As part of their application to be an approved self-directed IRA custodian, firms must complete an intensive application process that involves meeting specific IRS regulations, providing liability insurance and fidelity bonds, as well as experience managing various retirement accounts like Roth and traditional IRAs.
Additionally, the company should feature a sophisticated technological platform to safeguard data and transaction security. Multifactor authentication and strong passwords should be implemented for data protection purposes. Furthermore, excellent customer service and support should also be prioritized by this provider.
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