Understanding the Role of a 401(k) Plan Administrator and Third-Party Administrator

Text,401,k,plan,on,office,desk,table,with,keyboard,dollars,calculatorEmployer-sponsored retirement plans, such as 401(k) plans, require careful administration to ensure compliance with regulations and smooth operation. Two key roles in the management of 401(k) plans are the Plan Administrator and the Third-Party Administrator (TPA). In this blog post, we will explore the responsibilities of these two positions and clarify the difference between them.

1. 401(k) Plan Administrator:

The Plan Administrator is a person or entity designated by the employer to oversee the administration and operation of the 401(k) plan. They are responsible for ensuring the plan complies with all applicable laws, regulations, and plan documents. Key duties of a 401(k) Plan Administrator include:

Plan Design and Documentation: The Plan Administrator works with the employer to establish and maintain the plan’s design, including its provisions, eligibility criteria, and contribution options. They are also responsible for updating and distributing the Summary Plan Description (SPD) to participants.

Enrolling and Educating Participants: The Plan Administrator enrolls eligible employees in the 401(k) plan and provides them with the necessary information about their investment options, contribution limits, and vesting schedules. They also offer educational resources to help participants make informed decisions about their retirement savings.

Contribution Processing: The Plan Administrator ensures that all participant contributions and employer matching or profit-sharing contributions are accurately processed and deposited into the participants’ individual accounts. They also oversee the administration of loan provisions, if available in the plan.

Compliance and Reporting: The Plan Administrator must maintain the plan’s compliance with regulations set by the Internal Revenue Service (IRS), the Department of Labor (DOL), and other governing bodies. They oversee the annual testing of the plan, including discrimination testing and contribution limits. Additionally, the Plan Administrator prepares and submits necessary reports, such as Form 5500, to the IRS and DOL.

2. Third-Party Administrator (TPA):

A Third-Party Administrator is an entity that provides administrative services to the 401(k) plan on behalf of the employer. Unlike the Plan Administrator, who is typically an individual within the company, a TPA is an external service provider. The responsibilities of a Third-Party Administrator may include:

Recordkeeping and Reporting: The TPA maintains accurate records of plan contributions, investments, and participant data. They handle the processing of participant contributions, investment changes, and withdrawals. The TPA also provides regular statements to participants, summarizing their account activity and balances.

Compliance Testing and Filing: The Third-Party Administrator performs compliance testing, such as multiple nondiscrimination tests, to ensure the plan meets legal requirements. They also prepare and file necessary forms, including Form 5500 and related schedules, to report plan activity to regulatory authorities.

Plan Design and Consulting: TPAs can assist in designing or amending the plan to fit the employer’s objectives, within the boundaries of legal requirements. They offer consultation on plan features, investment options, and employee communication strategies. TPAs may also provide guidance in selecting and monitoring investment options in the plan.

Communication and Support: The TPA serves as a resource for plan participants, providing education and support regarding plan features, investment options, and retirement planning. They may offer online tools, calculators, and educational materials to help participants manage their retirement savings effectively.

Difference between the Plan Administrator and Third-Party Administrator:

While the roles of Plan Administrator and Third-Party Administrator overlap to some extent, there are key differences between them:

Legal Responsibility: The Plan Administrator is ultimately responsible for the administration and compliance of the plan. They have a fiduciary duty to act in the best interest of participants. In contrast, the Third-Party Administrator is a service provider hired by the employer to handle administrative tasks, but they do not have fiduciary responsibility for the plan.

In-house vs. Outsourced: The Plan Administrator is typically an individual within the employer organization, such as a Human Resources or Finance professional, who is directly involved in managing the plan. On the other hand, the Third-Party Administrator is an external entity hired by the employer to take care of administrative tasks on their behalf.

Specific Roles and Functions: The Plan Administrator is primarily responsible for ensuring legal compliance, plan design, participant education, and overseeing the overall operation of the plan. The Third-Party Administrator, as a service provider, specializes in administrative services such as recordkeeping, compliance testing, reporting, and participant support.


The roles of the 401(k) Plan Administrator and Third-Party Administrator are critical in the effective administration and operation of a retirement plan. While the Plan Administrator assumes the ultimate responsibility for the plan’s compliance and management, the Third-Party Administrator provides specialized administrative services. Understanding their distinctions can help employers efficiently fulfill their obligations and provide participants with a well-run and compliant 401(k) plan.

Got Questions? Let Us Help!

Fiduciary Advisors, Ltd. is a business-to-business associated pension administrator based in Phoenix, Arizona, since 1990. We specialize in designing and planning employee retirement programs, pensions, profit sharing, and are third-party administrators for 401K for small- to medium-size businesses. We conduct enrollment meetings, prepare detailed actuarial calculations, cash-balance plans, and financial consultation for all businesses. Give us a call today for more information!