A plan sponsor can be any individual or organization that acts on behalf of an employer by making decisions about which investments should be made available to employees through their plans, how much money should go into each investment option, and what types of fees will be charged for each option.
They also have the responsibility of educating employees on how much they should contribute based on their income level and other factors such as age or marital status.
Finally, if there are any changes made to the plan (for example: adding new funds), this must be communicated clearly with both participants and providers so that everyone is aware of what’s going on at all times.
Responsibilities of a plan sponsor
There are several important responsibilities that a plan sponsor has in order to ensure a successful 401k plan.
Some of these include:
Choosing the right type of plan for their company and employees
Making investment decisions on behalf of employees, including which funds should be available and how much money should go into each option
Making sure that the plan meets all IRS requirements
Participant Education: Educating employees on how to save for retirement, what contribution level is right for them, and how to invest their money
Updating employees on any changes made to the plan, such as adding new funds
Ensuring that providers are meeting their obligations under the plan
Keeping track of all contributions and investment earnings so that participants can see how much they’ve saved over time
Promoting regular reviews with providers to ensure that they’re still meeting their obligations under the plan.
Tips to ensure success
Now that we’ve covered some important things about what a plan sponsor should do and why, let’s talk about how they can ensure success.
First of all, make sure you have the right type of plan for your company! This might seem obvious but it’s easy to get caught up in thinking only about what will benefit employees the most and not what will be the easiest for you to manage.
Secondly, it’s important to make informed investment decisions on behalf of employees. This includes choosing which funds should be available and how much money should go into each option.
You don’t want employees feeling overwhelmed or stressed about making choices about their retirement savings – that’s why you’re there to help make the decision for them.
Third, always be sure to meet all IRS requirements. This might seem like a lot of work but it’s important in order to maintain the tax-advantaged status of 401k plans.
Fourth, educate employees on how to save for retirement and what contribution level is right for them.