It takes a white-collar village to run your 401(k) plan.

Many 401(k) participants, even those with a relatively sophisticated understanding of their investments, know of only two parties engaged in their plan: the employer who sponsors the plan and the mutual fund firms in which they invest their money. However, as is usually the case when trillions of dollars are involved, a lot of other parties have a hand in the process.

Since the creation of the first 401(k) in 1981, the cottage industry of 401(k) servicing businesses has mushroomed -- investment consultants arose to advise sponsors on which funds to choose, attorneys and auditors to ensure the plan meets compliance standards, custodians to execute the massive trades within 401(k) plans and so on. Because retirement plans are a complex minefield of financial and legal issues, the various parties serve essential roles.

It's also essential for individuals to have an understanding of the various groups -- for they largely define how your retirement will take shape. "Investors need to understand: Who are all the chefs in the kitchen?" said Steve Lansing, founder of Sentinel Fiduciary Services, an Orlando, Fla.-based fee-only retirement plan consultant. "Who are all the parties financially benefiting from the plan?" Meanwhile, investors need to know who pays for their services, how much they get paid and if they have any other side businesses with other 401(k) service providers (such as the fund companies, say) that potentially cloud their partiality in assisting you.

There are 432,000 401(k) plans in America, and no two are exactly alike -- so coming up with a one-size-fits-all chart of the 401(k) village isn't possible. However, the following list details some of the likely parties engaged in stewarding your 401(k), what function they serve and the questions you need to ask to determine if they are best serving your exclusive interests. Sometimes, one entity will serve several of the functions.

The Participant.

That's us, and our beneficiaries, too: the spouse and kids. The greatest responsibility of a defined-contribution plan such as a 401(k) falls to the participant. And while participants are the only link in the chain that is absolutely free from any potential conflict of interest, we still manage to inflict plenty of damage to our retirement plans because of a lack of financial literacy. Check out this

recent story for more about the participant's role.

The Sponsor.

This is the employer who sets up the plan. Most times, the sponsor constitutes two groups: the company itself, which is usually the "named fiduciary," and the people who work in the human resources or Treasury department who oversee the plan for the company, making them the "functional fiduciary." When the employer's 401(k) committee meets, those functional fiduciaries are the ones who should be looking out for the participants' interests first and foremost. In the best of all conflict-free worlds, the sponsor should pay all the expenses of a plan, rather than let other groups "pick up the costs" -- and pass them back to participants. But in many small plans, it's just not doable.

The Attorney.

A pension plan is a complicated legal document, so it's prudent to have an ERISA attorney -- one who specializes in laws associated with the Employee Retirement Income Security Act of 1974, that governs 401(k) plans. The attorney provides legal advice, documents and other resources. Many times, the attorney is from a mom-and-pop law firm, but all the big white-shoe firms have ERISA attorneys as well. The potential for conflicts of interest here don't run very high -- if anything, the "old boy" network might play a role in a few instances. In other words, a big law firm suggests that the sponsor to hire a big bank -- maybe they even note that they handle the firm's plan. What the attorney may not mention is that said big Wall Street firm also brings in the most legal business for the firm. Rare instances aside, this isn't a major area of concern for individuals, except to be relieved that your firm has a good ERISA attorney.

The Auditor.

The auditor typically is hired by the company -- and they are necessary for plans with more than 100 participants. As with the attorneys, sponsors can retain auditors from the local mom-and-pop CPA firm that has a 401(k) business or get one from one of the big accounting firms. The best-case scenario is an auditor who is an independent party working exclusively for 401(k) plan sponsors -- with no business relationships with the mutual fund firms, for instance.

The Consultant/Adviser.

About 50% of 401(k) sponsors have hired an outside consultant to help choose the funds and the makeup of their plans, according to Greenwich Associates. They fill a vital function: to advise sponsors on how to manage their plan. This is a huge area, and the services vary widely from the good, the bad and the ugly. The consultant may be from a big Wall Street brokerage such as

Merrill Lynch



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Morgan Stanley


-- they may be inclined to sell you the funds that they offer in-house. They may be divisions of insurers such as



. Other big players include Mercer Consulting, a unit of

Marsh & McLennan

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, Callan Associates, Towers Perrin and so on. There is also a growing niche segment of boutique firms that specialize only on retirement plans.

There is also a broad array of ways in which they get money back: commissions, a combination of fees and commissions and fee-only policies. With commissions, they often get paid through mutual funds -- which participants ultimately pay for -- 12b-1 fees and finder's fees. Many times, consultants also have lucrative business dealings with the mutual fund firms they are charged with recommending or not recommending -- which raises undeniable potential for conflicts of interest. The best-case scenario with a consultant: a fee-only consultant that has no business whatsoever with investment firms. Participants would be well-served asking their sponsor if their plan has a consultant, and if so, how do they get paid and are they truly independent?

The Third-Party Administrator.

Virtually all 401(k) plan sponsors hire third-party administrators to handle compliance, accounting and back-office functions involved with a 401(k) plan. The TPA may be independent or from a big bank or brokerage that is handling other facets of your plan. TPAs often get paid through revenue-sharing arrangements with mutual fund firms -- such as subtransfer agent fees that may be asset-based or flat fees. These fee arrangements, which can range as high as 65 basis points, may not always be clearly disclosed to participants.

The Custodian.

Somebody has to handle all the trades the millions of 401(k) investors make. Enter the custodian -- a conduit across which thousands of mutual funds are traded. Few employers have ever heard of the custodian who handles their individual trades. But one little-known custodian has received some troubling press recently. Security Trust Company, which handles more than $10 billion in assets for its clients, was named in the New York attorney general's settlement with hedge fund Canary Capital Partners. According to the complaint, Security Trust allowed Canary to late trade hundreds of mutual funds "under the radar," so that neither the mutual funds nor the investors had any idea that a hedge fund was skimming profits off the top by effectively paying yesterday's prices for today's funds. Security Trust has reportedly said it has not done anything wrong, and hasn't been charged. Many custodians, including Security Trust, also serve as the trustee for a 401(k) plan.

The Trustee.

All 401(k) plans, by law, must have a trustee -- the entity that holds participants' money in a trust account that is separate from the employer's assets. The trustee can be a fund company, a broker, a custodian. Recently,


employees filed suits against Merrill Lynch for its role as the trustee of the telecom company's 401(k) plan. However, the trustee's primary function isn't investment advice, but rather to serve as the protector of the participant's money.

The Investment Manager/Fund Company.

These are the investment firms that offer a roster of options, usually stock, bond and money-market funds. Typically, these firms offer a large number of their own funds, but increasingly the fund companies also offer options from other investment concerns. They get paid by the expenses their funds charge -- which average about 1.5% a year for actively managed funds. Many times, the big investment company provides a host of other services for your 401(k) plan. Unfortunately, that doesn't mean all the other costs magically disappear to efficiencies -- instead, it typically means participants are simply paying one chef rather than several.