What it means
A retirement or benefit plan has many moving parts, including enrolling members, collecting contributions, keeping records and paying benefits. The plan administrator is the party in charge of making sure all of that happens correctly.
It is a formal role, usually named in the plan documents, and the person or body in it carries real legal responsibility. In many systems, such as the United States under its main pension law, the plan administrator is the person named in the plan document, and if none is named it is the employer that set up the plan.
Larger employers often name a committee or a department, and some hire a specialist firm to do the work. Hiring an outside firm for the paperwork does not remove the legal responsibility from the named administrator.
Typical duties include giving members a summary of the plan, keeping the records, filing annual reports with the authorities, handling claims and appeals, and making sure contributions are paid on time. The administrator also has to follow the plan rules and deal with changes in the law.
Mistakes can lead to penalties, so many plans keep detailed procedures. The administrator is often a fiduciary, which means someone who must act in the best interests of the members.
This is a higher standard than ordinary business conduct. It includes choosing and monitoring service providers, keeping fees reasonable and avoiding conflicts of interest.
The role is different from other parties. The plan sponsor creates the plan, the trustee holds the assets, the investment manager picks investments and the participants are the members.
One organisation may hold several of these roles, but each role has its own responsibilities. For a small business, the practical advice is to be clear about who is the administrator and to keep a calendar of deadlines.
Missing a filing, paying contributions late or giving members wrong information can be expensive. A good record of decisions helps if a regulator or member asks questions.
In practice
Real-world examples.
Example
A company with 200 employees sets up a retirement savings plan and names its head of HR as the plan administrator. She collects member data each month and sends it to the payroll provider. She also files the annual report required by the authorities and keeps copies of every notice sent to members.
Example
A regional hospital group has a pension scheme with 5,000 members and appoints a benefits committee as administrator. The committee hires an outside firm to manage the member records and payments. The committee still reviews the provider's work each quarter, and it records its decisions in written minutes.
Example
A member disputes the amount of a retirement payment. The plan administrator reviews the plan rules and the records, finds an error in the salary data and corrects the payment. The member receives a written explanation and a statement showing the corrected figures.
Case study
Seen in the real world.
Elmstead Engineering is a fictional manufacturer, and this story is illustrative. Its owner assumed the payroll company was the plan administrator of the retirement plan, but the plan document named the company itself.
When the company failed to file the annual report on time, it faced a late filing penalty. The owner discovered that the payroll provider only handled data and was not responsible for the filing. The penalty and the cost of professional help came to $6,000, which was money the company could have saved with a simple reminder.
The company formally appointed a benefits committee and put filing deadlines into the corporate calendar. It also wrote a checklist for each month, covering contributions, member communications and provider reviews. The owner asked an adviser to check the plan document once a year to confirm that the named administrator was still correct. The illustrative lesson is that responsibility stays with the named administrator, even when tasks are outsourced.
Watch out
Common mistakes.
- Assuming that a payroll or pension provider is the legal administrator when the plan document names someone else, such as the employer or a committee.
- Missing filing and disclosure deadlines, which can lead to penalties and unwelcome attention from the regulator.
- Forgetting that the administrator is often a fiduciary with a duty to act in members' best interests.
Questions
People also ask.
Who is the plan administrator if none is named?
In many systems it is the employer that sponsors the plan.
Can an administrator hire outside help?
Yes, but it remains responsible for choosing and monitoring that help, so it should review the work and the fees regularly.
Is the administrator the same as the trustee?
No, the trustee holds and protects the plan assets, while the administrator runs the plan, although one organisation can sometimes hold both roles.
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