What is a Plan Sponsor?

A Plan Sponsor is the individual or organization that establishes and maintains a retirement plan, such as a 401(k) or pension plan, for the benefit of its employees.

The Plan Sponsor is responsible for selecting and monitoring the investment options offered under the plan, as well as for ensuring that the plan is in compliance with all legal and regulatory requirements. The Plan Sponsor may also be responsible for funding the plan, and for providing information and education to plan participants about the plan and their investment options.

Responsibilities of a Plan Sponsor

The responsibilities of a Plan Sponsor typically include:

  1. Establishing and Maintaining the Plan: This includes setting up the plan, selecting and monitoring the investment options offered under the plan, and ensuring that the plan is in compliance with all legal and regulatory requirements.
  2. Funding the Plan: This includes making contributions to the plan on behalf of eligible employees and ensuring that the plan is adequately funded to meet its obligations to plan participants.
  3. Providing Information and Education to Plan Participants: This includes providing plan participants with information about the plan, including the investment options offered under the plan, and providing education and resources to help participants make informed investment decisions.
  4. Selecting and Monitoring Plan Service Providers: This includes selecting and monitoring plan administrators, recordkeepers, and other service providers, and ensuring that they are meeting their obligations under the plan.
  5. Ensuring Compliance with ERISA: The Employee Retirement Income Security Act (ERISA) sets minimum standards for pension and welfare plans in private industry and it’s the plan sponsor’s responsibility to ensure that the plan is in compliance with all applicable provisions of ERISA.
  6. Fiduciary Responsibility: The plan sponsor has a fiduciary responsibility to act in the best interest of plan participants, to ensure that the plan is being administered in compliance with the plan documents, and that the plan is operating for the exclusive benefit of its participants and beneficiaries.
  7. Reporting and Disclosure: Plan sponsor is also responsible for filing annual reports and other required disclosures with the government agencies, such as the Department of Labor and the Internal Revenue Service.
  8. Maintaining Accurate Records: Plan sponsor must maintain accurate records and provide them to the government agencies and plan participants as required.
Banner 4

What is the process of becoming a Plan Sponsor?

The process of becoming a Plan Sponsor typically includes the following steps:

  1. Feasibility Study: The organization must conduct a feasibility study to determine if a retirement plan is appropriate for the organization, and to determine the costs and benefits of different types of plans.
  2. Plan Design: The organization must design the plan and select the investment options that will be offered under the plan.
  3. Plan Document: The organization must create a plan document that outlines the terms and conditions of the plan, including the plan’s eligibility requirements, contribution limits, and vesting schedule.
  4. Service Providers: The organization must select and engage service providers such as plan administrators and recordkeepers to assist with the administration and compliance of the plan.
  5. Compliance and Registration: The organization must ensure that the plan is in compliance with all legal and regulatory requirements, including the Employee Retirement Income Security Act (ERISA), and register the plan with the government agencies such as the Department of Labor and the Internal Revenue Service.
  6. Communication and Education: The organization must provide plan participants with information about the plan, including investment options and other benefits, and provide education and resources to help them make informed investment decisions.
  7. Ongoing Administration: The organization must administer the plan on an ongoing basis, including making contributions to the plan, monitoring the performance of the plan’s investments, and ensuring compliance with legal and regulatory requirements.
  8. Review and Update: The organization must review and update the plan regularly to ensure it continues to meet the needs of the organization and its employees.