Fiduciary Responsibilities of a 401(k) Plan Administrator and Plan Sponsor

As a 401(k) plan administrator, your responsibilities include specific fiduciary administrative duties you must adhere to stay in compliance with ERISA, DOL and IRS regulations. Even if you hire a third-party CPA firm to assist as administrator and auditor, you are still responsible for these administrative duties.

Plan administrators are tasked with managing a company’s 401(k) and are often involved in the formation or adoption of the plan, though not always. While plan sponsors also bear a fiduciary duty to the plan and its participants, the fiduciary duty of a plan administrator are more of a day-to-day nature.

Fiduciary duties for an administrator include processing transactions for plan participants, performing discrimination tests and audit support, monitoring the plan to ensure it remains in compliance with plan rules and federal regulations and completing Form 5500, Safe Harbor notices compliance filings, among others. Many of these duties may be outsourced but the responsibility for the accuracy of all plan activities remains with the plan fiduciaries.

ANDERS QUICK LIST OF 401(k) PLAN ADMINISTRATOR RESPONSIBILITIES

  • Reporting. It’s important to have all plan reports current and accurate at all times.
  • Loans. Ensure that you are in compliance with the rules and regulations of your plan regarding 401(k) participant loans.
  • Expenses. Are your plans investment or loan expenses reasonable?
  • Contributions. Make sure that your participant contributions are contributed to the plan trust in a timely manner.
  • Disclosures. As the administrator, you must provide a plan summary report annually to all plan participants.
  • Participant Deposits. You must make sure that all contributions are promptly deposited and recorded.
  • Investments. You must maintain plan investment reporting at the plan and participant level.
  • Fidelity Bond. Ensure the plan has a fidelity bond in place with the appropriate coverage level.
  • Valuation. Be sure that you have the proper valuation of all your plan assets.
  • Selecting a Plan Committee. Selecting your plan committee is vitally important to your retirement plan. The plan committee should include employees at an executive level with experience in decision-making. For example: Your committee should consist of people from departments with financial and investment experience, such as the:
    • Legal department
    • CPA
    • Treasurer or finance department.
    • Human resource department

This is just a short list of a 401(k) plan administrator responsibilities. Some businesses find it more convenient to hire a third party fiduciary for their retirement plan to ensure that the plan reporting is up-to-date and organized when it’s time for a 401(k) audit.

A 401(k)Plan Sponsor’s Fiduciary Duties

If you are the plan trustee (sponsor) for your company sponsored retirement or 401k plan, you are legally responsible for any decisions made for the plan. It is vital that you know and understand you responsibilities.

As a plan sponsor, it is your duty as fiduciary to run the plan in the best interest of the plans participants. You must ensure that all investments perform well to their target and the fees are at industry standards. Many plan participants are not savvy when it comes to investing nor do they understand the 401k industry or its fee structure. Therefore, it is the duty of the fiduciary to guide plan participants.

WHO CAN BE A 401(k) PLAN FIDUCIARY?

The majority of the time the business owner is the plan fiduciary. However, in the corporate world, a fiduciary can be more than one person. The plan fiduciaries may include:

  • The business owner
  • HR manager
  • CFO

For non-profit organizations the fiduciaries may consist of:

  • The board of directors
  • The financial committee

If a fiduciary does not fulfill their duties, problems will occur. For example, the fiduciary can be held personally liable for the decisions they make regarding the retirement or 401(k) plan. The Department of Labor (DOL) will likely go after the fiduciary’s personal assets unless there was illegal activity involved. Employees may also file a lawsuit and lodge a complaint with the DOL.

The DOL’s Department of Employee Benefits Security Administration (EBSA) would like to increase its audits for every retirement plan to every two years. The EBSA audits often find errors which will mean paying fines and fees. After the fines and fees are paid then they will take you through a correction process.

MEETING YOUR FIDUCIARY RESPONSIBILITIES

Visit the Department of Labor (DOL) website at http://www.dol.gov/ and download the booklet: Meeting Your Fiduciary Responsibilities.

Hiring a CPA firm that specializes in 401(k) auditing will make a difference in how smoothly your audit goes. Utilizing modern technology, it is possible to assist you entirely “off-site”, and with little or no distraction to your daily office routine. At Anders, we also offer flat-fee pricing for 401(k) audits so there are no surprises when you receive your bill.

To get started, request a free 401(k) audit consultation below or contact the team at (314)-886-7913 to schedule an appointment.

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