What Is 401K & Retirement Plan Administration?


A retirement plan administrator is in charge of managing the day-to-day affairs and the decisions regarding the company's plan. To assist in the administration process, it is common for an administrator to retain a professional service provider. With 401ks, it is customary for a third party to perform such functions as preparing participants' records, preparing and filing the required government filings and processing participant distributions.


  • The administration of a 401k plan is set by the provisions of law and federal regulation and requires the filing of annual reports (form 5500). In addition, the tax code requires that traditional 401k plans undergo annual testing to ensure that the amount of contributions made on behalf of employees is proportional to highly compensated employees, such as owners and managers.


  • 401k services can be broken down to either bundled or unbundled. Bundled services have grown in popularity, as plan sponsors desire to outsource more of the plan administration duties. Bundled services can take several forms but generally they are provided through companies that offer full packages of participant record keeping, investment, trustee and communication services. This option is ideal for smaller companies because of the simplicity and low cost.


  • Unbundled services are ideal for larger companies that want more control. With an unbundled provider, a company can select a combination of in-house staff and providers to manage the retirement plan administration. Unbundled services tend to be more expensive and are more complex to administer since there are multiple sources to manage.


  • When selecting a service provider to assist in the administration process, cost is one criterion to consider. Costs vary but, in general, there are four ways to calculate fees: Asset-based, which is when expenses are based on the amount of assets in the plan; per-person, which is based on the number of plan participants; transaction-based, which is when expenses are based on the execution of a transaction or service; and flat rate, which is a fixed charge that doesn't vary. Fees can be calculated using just one or any combination of the methods.

Outsourcing Trend

  • Total benefits outsourcing is growing in popularity. This is when a service provider not only handles the 401k plan administration and record-keeping duties but also takes on the company's benefit and health plans.

Related Searches


  • Photo Credit investment image by Kit Wai Chan from Fotolia.com
Promoted By Zergnet


You May Also Like

  • What Does a Third-Party Administrator Do for Retirement Plans?

    Businesses of all sizes choose periodically between using their in-house staff to perform specific tasks or calling on outside expertise. Outside talent...

  • Job Description of a 401k/Pension Specialist

    Pensions and 401k plans are a type of benefit provided by employers that allows employees to save money for retirement while still...

  • How to Enroll in a 401k Program

    A 401k is a directed retirement savings program, named after the section pertaining to its regulation in the Internal Revenue Code of...

  • How to Select 401k Investments

    Because most employers allow their workers to self-direct their 401k funds, there are usually a diverse range of investment options open to...

  • 401(k) Employee Rights

    Many employers offer their workers a 401k plan to help them save for retirement. Workers voluntarily contribute a small portion of their...

  • 401k Retirement Plan Growth Calculator

    Part of planning your retirement budget is anticipating what your income needs and your possible income sources are. To do that, you...

  • Types of HR Outsourcing

    Outsourcing various functions of the Human Resources department may be a viable management strategy. Hiring outside entities to perform the work is...

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!