Delegating the Role of Plan Sponsor

Today we will discuss delegating the role of Plan Sponsors with your company retirement plan.

Every company offering a retirement plan needs a plan sponsor, who is responsible for overseeing the plan to ensure the benefit of its participants. This person, often the company's owner or decision-maker, carries the heavy responsibility of ensuring the assets within the plan are protected. Becoming a plan sponsor means accepting significant duties and personal risks tied to the role.

So, why might there be reservations about delegating the plan sponsor role? For one, this role holds significant decision-making power. If someone other than the owner or director is chosen and they make decisions the leadership doesn't agree with, those decisions can't be simply overridden without removing the individual from their duties. Additionally, if the plan sponsor leaves the company, there's an immediate need to find a replacement. Appointing a new sponsor isn't a swift process; it involves official approvals, and often, the incoming individual requires training about the role's responsibilities and inherent risks.

Furthermore, the frequent changing of the plan sponsor might be viewed with skepticism by both participants and regulatory bodies like the Department of Labor or the IRS. Regularly seeing different names on tax filings can cast doubts about the stability of the plan, which could, in turn, result in decreased participation.

While the tasks of a plan sponsor can be assigned to an employee or an external entity, it's vital to consider the implications. Often, the company's owner or top executive remains the plan sponsor, while administrative roles are delegated.

For more information on delegating the role of plan sponsor, contact us today.