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What Is an Authorized Plan Administrator?

We'll explore topics such as:

  • Who can administrate 401k plans
  • What the duties are
  • Where to find the right partner
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The employer, also known as the 401k plan sponsor, appoints an authorized administrator to:

  • Help create the 401k plan

  • Ensure that the program meets government regulation

  • Manage the day-to-day responsibilities

Who can be a 401k plan administrator?

A plan administrator can be a fiduciary, a financial broker, the employer, a third-party administrator, a committee, or a group of trustees working for the company put in charge of decision-making.

What are the duties of a 401k plan administrator?

A plan administrator is a recordkeeper who generally:

  • Designs the plan – How should the plan be structured? Should the employer use a match? Would a safe harbor option benefit the company? Plans can be customized to suit an employer’s preferences in terms of vesting, matching, options, and more.
  • Updates the plan – When regulations change, employers’ needs evolve, or the company is going through a merger or bankruptcy, the administrator amends the plan and completes the paperwork.
  • Manages daily operations – A 401k plan must follow a number of rules in order to receive tax exemptions and avoid legal issues.
  • Authorizes transactions – Enrollment, loans, and distributions require oversight from a gatekeeper.
  • Performs annual tests and filings – 401k plans must pass annual Internal Revenue Service tests, including ADP, ACP, and top-heavy tests proving nondiscrimination. Form 5500 must be filed annually.
  • Fixes problems – The administrator keeps a close eye on deferrals, contributions from highly compensated employees, and all paperwork to solve problems before they become a headache.
  • Consults – Employers and employees may have questions about how to best save for retirement. A good administrator can give sound, unbiased advice, while ensuring you follow the rules.

Bundled providers vs. dedicated third-party administrators

In-house administration is a lot of work, which is why many employers outsource the administration of their 401k plans.

Brokers who do administration often charge high fees for their services. Bundled providers offer easy options, but charge hefty rates to modify plans or may be unable to accommodate changes. Dedicated third-party providers offer the most flexibility in plan design and implementation.

How do plan administrators make money?

Plan administrators may charge clients a fee based on a percentage of Assets Under Management, a Per-Participant fee, a flat, monthly fee, a per-transaction service charge, or any combination of these.

The lowest cost plan administrators, like Ubiquity, only charge a flat monthly rate. Paying for administration can often help employers save costs by avoiding legal challenges and maximizing all tax benefits.

How do I find the authorized plan administrator for ERISA purposes?

The authorized plan administrator must sign off on Form 5500, so for ERISA purposes, you will have to know who your 401k plan administrator is. With multiple people involved in the program’s day-to-day operations, it can be confusing to know who does what. However, your Summary Plan Description should clearly list who the administrator is.

If you have any questions about what an authorized plan administrator does, or have other questions about small business 401k plans, contact Ubiquity to learn more.

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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2020 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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