Here’s Adam Bergman’s most recent article from the Forbes Finance Council –
When a small business owner decides that they wish to establish a 401(k) qualified retirement plan for themselves and their employees, one of the first questions that arises is: “Who will take care of the plan’s recordkeeping and administration requirements?”
As the president of a retirement planning firm, I’ve noticed that many small business retirement plans will appoint the employer as the plan administrator. However, in other cases — and for good reason — the employer will appoint a third-party entity, better known as a third-party administrator (TPA), to perform the duties associated with the plan administrator. By appointing a TPA, the employer can outsource the esoteric day-to-day plan administration functions to a qualified third-party. However, the employer does not discharge liability by delegating plan responsibilities to a plan administrator. In addition, a plan administrator may become a plan fiduciary depending on the discretionary control granted.
To comply with the 401(k) plan rules, I believe each 401(k) plan should have a plan administrator. The plan administrator is the person or entity responsible for the day-to-day plan operations and administration. A plan administrator’s day-to-day duties generally involve:
• Deciding when an employee becomes eligible to participate in the plan
• Calculating employee and/or employer plan contribution amounts
• Preparing and filing plan tax forms (i.e., IRS Form 5500)
• Interpreting and explaining plan provisions
• Providing eligible plan employees with notices, information and relevant plan details
• Calculating the plan benefits to be allotted to each individual
To design the appropriate type of retirement plan for your small business and your employees, you should take many factors into consideration.