Discussion:Plan Sponsor vs Plan Administrator

This is one of my pet peeves!

You're right, the employer is the plan sponsor. The administrator is responsible for filing the form 5500. It's possible that the insurance company is serving as administrator, but unlikely in my experience. They may be only a "service provider".

In my experience with Fidelity and Paychex, the service provider is often not taking on the responsibility of being the plan administrator. Rather they are leaving the job to the employer.

Typically they will advise the employer/administrator that form 5500 is needed and even walk them through filling it out, but are not taking responsibility for it.

So, I think you'll need to determine who will be the administrator by asking the insurance company or looking at the paperwork your client is signing.

Retirement plan vocabulary is full of terms that have multiple definitions and exceptions to the definitions. There are several parties involved with section 401 qualified plans, and often a specialist's knowledge of retirement subspecialties other than his own is dangerously defective. The 2 most common errors made with qualified plans are the failure to timely file the 5500 and the failure to timely amend the plan document. The plan document providers are doing well if they can imprint these responsibilities into the sponsor's awareness, which frequently doesn't happen.

ERISA is the Employee Retirement Income Security Act of 1974 that revamped the rules regarding employee benefits. Of the four titles within ERISA, it's usually Title I you're dealing with when you're speaking of an "Erisa Plan.” Title I is enforced by the EBSA branch of the Department of Labor and has to do with plan eligibility, vesting, funding, reporting, disclosure, and fiduciary standards. Plans sponsored by a church or government or plans with no rank and file employees will typically be exempt from Title I (exempt from both responsibilities and protections) and are the 'non-Erisa' plans.

Title II contains many of the tax related Erisa rules. There are parallels to the Title I eligibility, vesting, and funding, with the ERISA legislation creating or amending Internal Revenue Code sections. As a former IRS plan specialist, I would refer to the IRC instead of Erisa in most cases. There are additional Title II topics like IRC section 410 coverage, 415 contribution/benefit limitations, 416 topheavy rules, and 401(a)(31) rollover option rules.

Actionbsns, when it comes to a plan loan we have to meet the exception to the usual rule against self dealing. So the IRS will look to see the IRC section 4975 prohibited transaction rules and the 72(p) and 1.72(p) regulations have been complied with. If you're seeing ERISA mentioned, I think it's because the Department of Labor ultimately has the final say on whether or not a prohibited transaction has occurred. I can't personally recall a case where DOL got involved where it's a 1 person plan. In most if not all situations involving a 1 person plan, you just try to meet the IRS rules.

With the required electronic filing of the 5500 using the Efast system, the processing is done by the DOL. This is true even if the filing is a 5500-EZ, which is a filing for a plan that's not under DOL's Title I jurisdiction. So DOL might tell you the filing is late or defective, but it's the IRS that will take it from there. Conversely, when paper returns were filed with IRS service centers, most recently Ogden, some returns were mainly under DOL jurisdiction, such as non retirement benefit plans. If a filing was missing a required CPA audit, the IRS might inform you of this but the DOL would be the one to follow through, since the audit is a Title I requirement.

Back on the administrator topic, one person plans are often self administered. Plans with just a few employees are often self administered too, but this has gotten more complicated in recent years with the increasing fiduciary responsibilities.