Fact Checked

What is a 401k Administrator?

D. Waldman
D. Waldman

For companies that offer their employees a 401k savings plan for retirement, a 401k administrator can play a key role in the success of the plan itself. The basic duties of the 401k administrator include employee education and support, plan budgeting, and fund management. The person handling the administration of the plan can be an in-house employee, a representative from the 401k provider, or a third party.

The 401k administrator is the person directly responsible for providing education and plan support to all employees. This may include conducting training sessions which emphasize various plan benefits and assisting in the creation and distribution of plan materials and enrollment forms. The 401k administrator often becomes the point person during open enrollment, when new employees are entering into the plan for the first time or when existing plan members have the need to make changes to their current plan details. The administrator is also in charge of communicating new laws and regulations passed that may affect the way the plan is handled.

Employees may benefit from discussing retirement with a professional.
Employees may benefit from discussing retirement with a professional.

The cost of running the 401k plan itself may also be managed by the 401k administrator. The person in this role will often have a direct say in many of the items affecting the operating cost of the plan, including plan benefits offered, the availability of certain funds in the plan, and the assigning of various plan costs to the employee, the plan, or a combination of both. While added benefits and low employee cost may work well to raise participation levels, reduced benefits and increased employee costs help to keep company costs affordable.

With regards to fund management, the 401k administrator works directly with the plan provider to determine which of the many investment funds available should be offered to employees. This plays a major role in contributing to plan costs and also serves as a determining factor in the level of satisfaction employees have with their fund offerings. While there are a wealth of investment funds to choose from that offer consistently higher returns than others, these same funds often have a higher investment costs associated with them. The 401k administrator must also be sure to include a variety of low-risk and low-return fund choices, primarily for employees who prefer to invest their savings more cautiously.

A 401k plan can have anywhere from one to three plan administrators. Medium companies will often choose to keep this role in-house, offering employees direct access to the services the administrator provides. Larger companies, on the other hand, often turn to third-party companies to provide a plan administrator, reducing the liability the company may hold with respect to the way the plan is being managed. Small companies tend to rely on the administration services offered by their plan provider.

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I changed administrators of my company’s retirement plan five years ago to Steidle Pension Solutions and wish I had done it much sooner. No hidden fees, friendly and knowledgeable staff, and quick/clear responses to my questions.

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    • Employees may benefit from discussing retirement with a professional.
      By: Ljupco Smokovski
      Employees may benefit from discussing retirement with a professional.