Congratulations! You’ve successfully setup your organization with an employee retirement plan. Doing so has unlocked several benefits for your organization and your employees, including: offering employer-sponsored savings accounts to attract and retain top talent to your firm, ensuring your organization meets IRS regulations, and utilizing tax-saving strategies from eligible tax deductions by matching employee contributions.
Now that you’ve set up your organization’s retirement plan, it’s important to understand what responsibilities the plan sponsor and the plan administrator must do in order to run the plan successfully.
Plan Sponsors and Plan Administrators
Firstly, it’s important to distinguish between the plan sponsor and the plan administrator. A plan sponsor is typically the employer or a designated employee of an organization that sets up the retirement plan for the organization and its employees.
A plan administrator, on the other hand, is a designated party tasked with the responsibility of running the plan. This could be the employer, a single employee/company executive or a committee of employees working together to oversee the plan.
Responsibilities of the Plan Sponsor
As the plan sponsor, it is your responsibility to ensure your plan is in compliance with all IRS regulations. Below, we’ve outlined the key components the plan sponsor will be responsible for in overseeing an employee retirement plan:
- Understand the plan. It is your responsibility to understand what your plan covers and what it does not. Specifically, understand what classification of employees are eligible to participate, the types and amounts of allowable plan contributions, how employer contributions are divided amongst participants, vesting periods, and when and how benefits will be paid.
- Ensure the plan is in compliance with IRS regulations. The IRS is not lenient with organizations who claim ignorance when it comes to performing required tasks around employee retirement plans. Therefore, it’s imperative that you know what your service agreement does and does not cover and ensure you’ve clearly assigned responsibilities for each task. Additionally, as a plan sponsor you have certain fiduciary responsibilities to your organization and your employees. Learn about them here.
- Communicate with your plan service provider. Plan sponsors need to be in regular communication with the plan service provider to ensure plans are running smoothly. Consider how new hires and terminations will affect the plan, ensure payroll compensation is accurate, and amending plan provisions when necessary. We suggest reviewing your employee retirement plan at least once a year with your plan service provider.
Responsibility of the Plan Administrator
The plan administrator will be in charge of executing the employee retirement plan. Such tasks may involve the following items listed below.
- Ensure the plan is current and up-to-date. It’s the employer’s responsibility to ensure the employee retirement plan is in compliance with all regulations, including updated laws and fiduciary responsibilities. Duties include: reviewing the plan for changes in the law and updating when necessary. Submitting required plan notices to participants file required forms with the Department of Labor and IRS, maintain records for participant accounts, and investing the plan funds and determining associated fees.
- Keep participants informed. Plan administrators need to be in regular communication with employees to explain how the employee retirement plan works, opportunities to participate, and explaining how benefits and vesting periods work. The plan sponsor needs to clearly communicate any changes in the plan and how these might affect employee accounts.
- Overseeing participants loans and distributions. Some employee retirement plans allow participants to take loans out against eligible accounts. The plan administrator oversees these requests and ensures they are within compliance with IRS regulations. The administrator will also oversee distributions to eligible beneficiaries.
At TrueNorth Retirement Services, we specialize in helping businesses create retirement services for their organizations and in assisting plan sponsors and plan administrators. We work with all sizes of organizations – from small businesses to large corporations – to create a plan that’s personalized for each organization and its employees.
At TrueNorth Retirement Services, we can help make your journey easier. We believe in honesty, reliability, and hard-work. As fee-only fiduciary advisors, we sit on the same side of the legal table as plan sponsors providing sound investment advice. We listen to plan sponsors and understand your challenges. Our goal is to understand your needs and then try to create a plan to address those needs. We appreciate the opportunity to assist you, your company’s retirement plan, and your participants.