What Is a 401(K) Plan Administrator and How Is That Different From a Third Party Administrator?

Man,proposes,piggy,bank,with,sign,401k.,retirement,pension,plan.What Is a 401(K) Plan Administrator and How Is That Different From a Third Party Administrator?

When it comes to managing a 401(k) plan, there are several key roles involved. Employers or plan sponsors are responsible for selecting and offering the plan to employees, while asset managers manage the investments within the plan. However, the role of a plan administrator is often overlooked, even though it is critical for ensuring the plan’s compliance and efficiency. In this article, we will explore what a 401(k) plan administrator is and how it differs from a third-party administrator (TPA).

What is a 401(k) Plan Administrator?

A 401(k) plan administrator plays a vital role in managing and maintaining a company’s 401(k) plan. The primary responsibilities of a plan administrator include:

1. Plan Compliance: The administrator ensures that the plan complies with all applicable laws, including the Employee Retirement Income Security Act (ERISA) and Internal Revenue Code (IRC) regulations. They are required to file reports with the Department of Labor (DOL) and the Internal Revenue Service (IRS) to demonstrate that the plan is operating in accordance with these regulations.

2. Plan Documentation: The administrator is responsible for drafting and maintaining the plan’s legal documents, including the plan’s summary plan description (SPD) and plan document. These documents provide essential information about the plan’s features, eligibility criteria, and other important details for both the employer and employees.

3. Employee Communications: The plan administrator is responsible for providing employees with information about the plan, including the plan’s features, investment options, and distribution rules. They also have to provide education and guidance to employees on how to manage their plan and make the best use of its benefits.

4. Recordkeeping: The administrator maintains accurate records of the plan’s assets, contributions, and distributions. They create and distribute plan statements and manage any loan or withdrawal requests. The records must be up-to-date and accurate to ensure employee benefits are appropriately credited and managed.

5. Plan Investments: The administrator works with the employer to select and monitor the plan’s investment options. They must ensure that investment fees are reasonable and that the investment options are suitable for the employees who will use them.

What is a Third-Party Administrator (TPA)?

A third-party administrator (TPA) is a company that provides administrative services to a 401(k) plan on behalf of the plan sponsor or employer. Their services include many of the same responsibilities as a 401(k) plan administrator, such as complying with all applicable laws and regulations, creating and maintaining plan documents, and managing employee communications. However, there are some key differences between these two roles.

1. Independence: A TPA is an independent service provider hired by the employer or plan sponsor to provide administrative services. Compared to a plan administrator, who may be an employee of the employer, a TPA provides an objective perspective and helps ensure that the 401(k) plan is being managed properly.

2. Specialization: A TPA will often specialize in a particular area of administrative services, such as recordkeeping, compliance, or investments, compared to a plan administrator who performs a broader range of administrative duties.

3. Level of Responsibility: While a plan administrator is responsible for many of the operational aspects of the company’s 401(k) plan, a TPA is responsible for the entire 401(k) plan, from administration to record-keeping to contributions. Depending on the TPA, they may also assume additional fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA).

Why Use a TPA Instead of a Plan Administrator?

There are several reasons why an employer might choose to use a TPA instead of a plan administrator. One common reason is to decrease the workload of the plan’s sponsor or employer. As plans grow in size, several aspects of administration and compliance become more complicated and require more time and effort. By hiring a TPA, the employer can outsource those tasks and refocus on other business priorities.

Another reason to use a TPA is expertise. Many TPAs specialize in certain areas of administration and compliance, and they can offer advanced services and expertise that may not be available in-house. This can be especially valuable to smaller employers or those with limited resources who don’t have the capacity to manage complex administration and compliance tasks.


A 401(k) plan administrator and a third-party administrator (TPA) play crucial roles in the management and administration of a company’s 401(k) plan. Both have important responsibilities to ensure that the plan complies with all applicable laws, establishes appropriate documentation, communicates with employees, maintains accurate records, and manages the plan’s investments. While a plan administrator may be on staff within the company, a TPA is an independent service provider hired by the employer to provide specialized expertise and manage the plan’s administrative duties. Regardless of who you choose to manage your 401(k) plan, it is essential to ensure that their services align with your company’s goals, strategy, and budget.