401(k) Plan Sponsor vs Plan Administrator

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

The sponsor of a 401(k) plan is the party (either an employer, labor union or professional organization) is the party that establishes the plan and creates the plan document that outlines all of the benefits, features and rules of the plan.<h2>401(k) Plan Administrator</h2> The plan administrator is the entity that is usually hired by the sponsor to administrate the day-to-day activities and services of the plan, such as opening and closing accounts, making rollovers, loans and distributions and doing all of the necessary accounting and record-keeping for the plan.

401(k) Plan Sponsor

The sponsor is responsible for making sure that its payroll department works in conjunction with the plan administrator.

This ensures that the right amounts of money are being contributed into the plan for each participant and that the money is being invested according to the participants’ choices.

Difference Between a 401(k) Plan Sponsor and Plan Administrator

The administrator of a 401(k) plan has a fiduciary duty to handle the money in the plan with the utmost care and diligence and operate the plan in a manner that is solely in the best interests of the plan participants, regardless of all other factors or circumstances.

The plan sponsor may also be named a fiduciary if it elects to administer the plan itself.

401(k) Plan Sponsor FAQs

What is a 401(k) plan?

A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.

What is a 401(k) Plan Sponsor vs Plan Administrator?

The plan sponsor establishes the features and rules of the plan. The administrator is hired by the sponsor to administrate the day-to-day activities and services of the plan.

What is the difference between a Roth 401(k) and traditional 401(k)?

With a Roth 401(k), taxes are paid as money is put into the retirement account. With a traditional 401(k), taxes are paid as money is taken out.

Are there other retirement savings plans other than a 401(k) plan?

Alternatives to 401(k) plans include traditional IRAs, Roth IRAs, pension plans (if your employer offers one), and 403(b) retirement plans for employees of non-profit organizations.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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