Once you have decided to set up a 401(k) retirement plan, the next step is to look for a plan administrator. A 401(k) plan administrator can help smoothen the process of setting up the plan and handle the administrative tasks for a certain fee.
Who is a 401(k) Plan Administrator?
A 401(k) plan administrator could be a person from the organization, such as the owner, or a group of top executives, or an outside party hired to set up and manage all aspects of the 401(k) retirement benefits program. As there are various aspects involved in plan management, most businesses partner with a third-party to fulfil the responsibilities of a plan administrator.
401(k) Plan Administrator Responsibilities
Some of the key duties of a 401(k) plan administrator include:
Consultation and Set-Up of the Initial Plan: The plan administrator has a duty of resolving any queries about traditional and Roth 401(k) contributions, fund matching, participant qualifications and so on.
Conduct Annual Audits and Comply with IRS Tests: Except for the Safe Harbor plan, all 401(k) plans are subject to the annual IRS non-discrimination tests and Top-Heavy tests. The administrator is responsible for conducting regular audits and processing the administrative paperwork associated with the IRS testing to ensure that the plan is compliant with the latest laws.
Correct Plan Errors: If the 401(k) plan does not pass the compliance tests, the administrator is responsible for refunding contributions to highly compensated employees and increasing the employer contribution to the low compensated employees to make the plan compliant with the non-discrimination requirements.
Submit Form 1099-R and Form 5500: If any contributions are made, the plan administrator is required to submit Form 1099-R. Besides, the administrator should annually submit information about program funds, compliance interests, vested interests, and deceased participants (if any) to the government through Form 5500.
Supervise Distributions: The law grants the administrators the right to issue benefits to participating employees based on the plan documents. The administrator has a duty of maintaining all documents about such payments.
Handle Status Changes and Communicate with Participants: Lastly, the plan administrator is also responsible for maintaining the plan paperwork related to departed employees, new recruits, or if a participant increases or decreases their contribution. In addition, the administrator should communicate with all participating employees and resolve plan-related queries.
How much does a 401(k) Plan Administrator Cost?
The plan administrator fees vary largely depending on the services that are offered. The plan administrator costs typically consist of a flat administrative fee, along with per-participant fees, asset management charges, and any other transactional fees surrounding loan administration and advisory services.
Consulting a Good 401(k) Plan Administrator
If you want to opt for a 401(k) retirement plan for your company, it is best to seek help from a professional plan administrator. A knowledgeable administrator can provide transparency and help you select the most suitable 401(k) plan based on your business needs. Besides, a good plan administrator will provide personal attention and undertake all the administrative tasks while also offering competitive retirement benefits.