Plan sponsors love a good illusion. And the biggest one in the 401(k) world is this: if the recordkeeper is doing a lot, they must be responsible for a lot. They’re not.
Recordkeepers are service providers. Very important ones. They handle transactions, participant accounts, websites, statements, and enough moving parts to make your head spin. But none of that makes them a fiduciary—at least not in the way that matters when things go sideways.
The problem is they don’t always look like vendors. They present investments. They show up to committee meetings. They hand you reports with charts and colors that scream “we’ve got this covered.” Over time, it’s easy for a plan sponsor to mentally outsource responsibility. That’s where the trouble starts.
Because when there’s a bad fund lineup, excessive fees, or a participant lawsuit, the recordkeeper isn’t the one in the hot seat. You are.
Unless you’ve formally hired a discretionary fiduciary—like a 3(38) investment manager—the decisions are still yours. Even if the recordkeeper “recommended” the funds. Even if they built the lineup. Even if they said, “this is what most plans do.” None of that transfers liability.
This isn’t about distrust. Most recordkeepers are trying to be helpful. But helpful isn’t the same as accountable. And confusing the two is how sponsors get burned.
A good process fixes this. Know who your fiduciaries are. Define roles clearly. Document decisions. Ask uncomfortable questions. And if you want someone else to take discretion, hire them properly.
Because in the end, when the music stops, the recordkeeper packs up their materials and goes home. The fiduciary? That’s still you.
