A Plan Sponsor’s Responsibilities


Congratulations! You have an employee retirement plan in place! Of course, you want to do the right things to run your plan. These tips will help you stay on course.

Remember that you, the employer, are responsible for keeping your plan in compliance

  • Your plan document must be written to comply with all requirements in the Internal Revenue Code.
  • Your plan must be administered to follow its terms in operation.
  • Review your plan annually to make sure it’s operating according to its terms and the law.

Double-check the options you selected in your adoption agreement

If you buy a pre-approved plan, you may have an adoption agreement. The adoption agreement is a supplement to the basic plan document and lists plan features from which you may choose. The adoption agreement becomes part of your plan. Know what your adoption agreement says about:

  • When your employees are eligible to participate in the plan;
  • Types and amounts of allowable plan contributions;
  • How employer contributions are divided among participants;
  • When participants are vested; and
  • When and how benefits are paid.

Know what your service agreement does and doesn’t cover

All plans require certain administrative tasks. Know who is going to do these tasks and make sure that person has the information they need to:

  • Review the plan document for law changes and update it when needed.
  • Apply the plan’s terms for participation, contributions and distributions.
  • Give the required plan notices to the participants.
  • File required forms and documents with the IRS or Department of Labor.
  • Determine if testing is required, and if so, run it timely.
  • Maintain records for participant accounts.
  • Invest the plan funds and review any associated fees.
  • Learn about your fiduciary responsibilities.
  • Correct the plan (if it becomes non-compliant) and pay any fees associated with this process.

Communicate with your pre-approved plan provider

Pre-approved plans are a convenient, easy way to start a retirement plan, but your responsibility doesn’t end once your plan is adopted. You should:

  • Learn what fees you’ll be charged by the pre-approved plan provider.
  • Keep the opinion or advisory letter issued by the IRS for your pre-approved plan.
  • Promptly sign any plan amendments the pre-approved plan provider sends you.
  • Send copies of plan amendments for your pre-approved plan to your plan administrator.
  • Inform your provider if:
    • you make changes to your business, employees or their compensation.
    • you need to make changes to your plan’s terms, for example, change your matching or contribution formula.

Communicate with your plan service provider

Communicate frequently with your plan service provider and/or payroll department for:

  • New hires, re-hires, terminations and compensation changes
  • Accurate payroll compensation amounts for each participant
  • Census data for determining plan eligibility and benefit payments
  • Data necessary to accurately identify highly compensated employees
  • Plan terms for defining employee contributions, plan payments and loans
  • Any plan amendments, for example, changes to the plan’s:
    • definition of compensation
    • hardship withdrawal provisions
    • loan provisions
    • contribution or allocation formulas

Keep up with your ongoing plan maintenance responsibilities

These tasks will help you keep your plan running smoothly and remain qualified for tax benefits.

  • Review your service provider’s reports, such as:
    • the allocation report for possible contribution errors.
    • the distribution report to ensure that participants have timely started their required minimum distributions and consented to these payments.
  • If your plan allows participant loans, ensure that:
    • loans were made according to the plan’s terms;
    • participants’ account balances were adequate to support the loan;
    • participants make their loan repayments timely; and that you act on defaulted loans.
    • For hardship withdrawals, keep documents that show the participant’s need.
  • Review your plan’s terms to ensure you are following them.
  • Get an independent review of your plan. - An independent reviewer may see something that has been overlooked by others, which could save money for you and your employees and may improve benefits.

Keep up with the rules

IRS compliance resources

IRS publications

U.S. Department of Labor publications