Who is the Plan Administrator for a Self-Directed IRA?
Plan administrator and custodian are two integral players involved with Self-Directed Individual Retirement Account (SDIRA). Both serve various roles.
Administrators handle paperwork related to transactions within your account such as buying and selling assets. They also conduct tests and file compliance filings on your plan – such as loans for 401(k) plans as well as making sure everything complies with federal regulations.
Custodian
Custodians hold assets and investments within a self-directed retirement account (SDIRA). Typically these are bank-affiliated, FDIC-insured custodians regulated by both IRS and State Banking Commissioner/Controller of Currency regulations.
Custodians oversee paperwork on transactions, produce statements and data reports, work with other parties to manage assets, store precious metals, real estate and foreign currencies as required and adhere to IRS guidelines and regulations to prevent prohibited transactions from taking place.
A good Self-Directed IRA custodian should enjoy an outstanding industry reputation, adhere to IRS rules and be established. Furthermore, they should offer their clients educational materials on self-directed investing to help them understand its process, rules and fees as well as respond quickly when inquiries about self-directed investing arise. Providing advice should remain the sole responsibility of trusted financial or tax advisors who hold an IRA ownership account.
Fiduciary
Fiduciaries are individuals or companies who undertake specific administrative responsibilities to comply with ERISA and IRS regulations, playing important roles within the IRA world without being directly responsible for buying and selling assets themselves; custodians maintain and protect actual assets while administrators facilitate transactions.
Whenever someone makes recommendations for retirement investments in an IRA, their recommendations must meet a five-part test to be considered fiduciary status and solely serve the best interest of retirement investors.
Your administrator choice is of vital importance. Find an administrator that allows the type of investments you wish to make and compare setup, maintenance and transaction costs as well as customer service levels offered by each company. In addition, look out for educational materials provided to further your investment education. To be safe with your retirement assets it’s essential that they sail on an experienced SDIRA company’s vessel.
Recordkeeper
Every retirement account, no matter its type or size, needs a record keeper. This could be any financial institution such as a bank, credit union, savings and loan association, trust company or another IRS-approved firm. A record keeper manages paperwork associated with buying and selling investments within an IRA as well as being able to produce statements, keep documents safe for legal action or bankruptcy filing.
Plan administrators provide consultation to plan sponsors and monitor compliance with federal regulations, authorizing transactions like loans and distributions as well as periodic filings and disclosures to state authorities. They can also help create the plan itself by formalizing its rules in written documentation.
Compliance Officer
Administrators of Self-Directed Individual Retirement Accounts (SDIRAs) manage transactions like buying and selling assets within the account as well as distribution processing to ensure all transactions comply with IRS regulations. Administrators may also facilitate alternative investments like real estate, foreign exchange/futures trading/precious metals/private lending/oil and gas options etc.
Plan administrators are also accountable for providing all required documents to IRA owners upon opening accounts, to avoid costly errors arising from incorrect or insufficient documentation. Failing to update an employee’s deferral rate could result in too much money being deducted from their paycheck and require payroll reversal as well as reimbursement to them.
Financial organizations may want to consider employing an ERISA compliance consultant as part of their risk reduction strategies for their IRA programs. At Ascensus, we offer comprehensive IRA training and compliance review services where one of our experienced consultants will review your program on site. If you would like more information about these services or need an audit done on site for compliance review purposes, reach out now for further assistance!
Comments are closed here.