6 Shocking Truths About Plan Sponsors You Never Knew

Plan sponsor definition: A comprehensive guide

A plan sponsor is the entity that establishes and maintains an employee benefit plan, such as a pension plan, health insurance plan, or retirement savings plan. The plan sponsor is responsible for the operation and administration of the plan, as well as for ensuring that the plan complies with all applicable laws and regulations. Below are 6 kinds of plan sponsors, a table about plan sponsor responsibilities, as well as a table about 401k plan sponsor duties.

Types of plan sponsors

1. Employer-sponsored plans are established and maintained by employers for the benefit of their employees. These plans are typically funded by employer contributions, and employees may also contribute to the plan on a pre-tax basis.
2. Union-sponsored plans are established and maintained by unions for the benefit of their members. These plans are typically funded by union contributions, and members may also contribute to the plan on a pre-tax basis.
3. Government-sponsored plans are established and maintained by governments for the benefit of their employees. These plans are typically funded by government contributions, and employees may also contribute to the plan on a pre-tax basis.
4. Church-sponsored plans are established and maintained by churches for the benefit of their employees. These plans are typically funded by church contributions, and employees may also contribute to the plan on a pre-tax basis.
5. Multiemployer plans are established and maintained by two or more employers for the benefit of their employees. These plans are typically funded by employer contributions, and employees may also contribute to the plan on a pre-tax basis.
6. ** Taft-Hartley plans** are multi-employer pension plans that benefit workers in a certain industry or profession who are represented by a union. These are governed by section 302(c)(5) of the Labor Management Relations Act ("Taft-Hartley Act").

401(k) plan sponsor duties

The Employee Retirement Income Security Act of 1974 (ERISA) imposes a number of duties on plan sponsors, including the following:

• Fiduciary duties: Plan sponsors must act as fiduciaries with respect to the plan and its participants and beneficiaries. This means that they must act in the best interests of the plan and its participants and beneficiaries, and must avoid conflicts of interest.
• Disclosure duties: Plan sponsors must provide participants and beneficiaries with information about the plan, including the plan document, summary plan description (SPD), and annual funding notice.
• Reporting duties: Plan sponsors must file annual reports with the IRS and the Department of Labor (DOL).
• Withholding duties: Plan sponsors must withhold taxes from plan distributions.
• Non-discrimination duties: Plan sponsors must ensure that the plan does not discriminate in favor of highly compensated employees.

Tips for plan sponsors

Here are a few tips for plan sponsors:

• Choose a qualified plan administrator: A qualified plan administrator is a person or firm that is responsible for the day-to-day administration of the plan. A qualified plan administrator can help you to ensure that the plan is operated in compliance with all applicable laws and regulations.
• Get professional advice: If you are not familiar with ERISA or other applicable laws and regulations, it is advisable to seek professional advice from an attorney or accountant.
• Monitor the plan: It is important to monitor the plan on a regular basis to ensure that it is operating in compliance with all applicable laws and regulations.
• Stay informed: The laws and regulations governing employee benefit plans are constantly changing. It is important to stay informed about these changes so that you can keep your plan in compliance.

Table: Plan sponsor responsibilities

Table: 401(k) plan sponsor duties