Employee participation in a 401(k) plan is often simple and straightforward. However, if you have questions about taking out a loan, rolling over your 401(k) into another plan, taking distributions, or changing your investment percentage, you may need to contact your 401(k) administrator for guidance.

The administrator of the plan is not always the same as your financial adviser. The Plan Administrator can be found in the Summary Plan Description or on Form 5500, which you can request a free copy of through the Department of Labor’s website.

What does a 401(k) plan administrator do?

A 401(k) administrator manages the plan on a day-to-day basis and ensures that it adheres to the law. It’s typically an outsourced third party who is tasked with handling all day-to-day responsibilities, including:

  • Consulting the employer on initial plan design, employee matching program, and profit-sharing options
  • Preparing the Summary Plan Description for participants and beneficiaries
  • Determining employee eligibility and enrolling participants
  • Approving all loans and distributions, as well as employee status changes
  • Monitoring IRS compliance and regulatory changes affecting the plan
  • Conducting audits and nondiscrimination testing
  • Filing Form 5500, Safe Harbor notices, and Form 1099-Rs with the IRS
  • Fixing compliance problems that may arise
  • Helping employers get through mergers and bankruptcies
  • Generating annual participant censuses, and
  • Communicating plan updates, changes, or benefits to employees.

How do employers choose 401(k) plan administrators?

When choosing a 401(k) plan administrator, consider the fee structures for services rendered.

A 401(k) plan provider may charge:

  • A monthly flat fee for administration
  • A per-employee charge
  • Flat transaction fees for loans or distributions
  • A fee based on a percentage of the total Assets Under Management (AUM)

The AUM fee may only be 1%, but that’s an extra $1,000 for every $100,000 in the account – which can add up considerably over time.

A 401(k) provider like Ubiquity does NOT charge AUM or per-employee fees. Since 1999, we have helped more than 100,000 small business employees save over $2 billion for their retirements, with a low, transparent, flat monthly rate. Employers are free to choose their own investments or work with any financial broker of their choosing, enjoying maximum flexibility to keep costs reasonable. We also provide a wealth of 401(k) resources so that employees can make informed decisions about their retirement savings.

Is it time for a new 401(k) plan administrator?

Exorbitant fees are the primary reason employers change 401(k) plan administrators. Yet, a recent survey found only 27 percent of people knew how much they were paying in 401(k) fees. This information is commonly disclosed in mutual fund prospectuses and annual reports.

The plan sponsor (a.k.a. the employer) typically retains control over hiring or firing a 401(k) plan administrator. Union employees may have their 401(k)s governed by a board of trustees who oversee the plan’s implementation. Yet, employee lobbies can also sway companies to take another look around and reconsider how much the plan is costing workers. After all, these fees come out of employee earnings.

Learn more about affordable 401(k) plans for low flat monthly fees by contacting Ubiquity.

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