PLANSPONSOR - February/March 2019 - 59

that responsibility. He typically does see
3(16)s making certain that annual notices
are being provided to participants.
" There are many flavors of 3(16)
administrators, " Price says, noting that
some TPAs could assume the position of
the named fiduciary as specified in the
plan document, " but we don't see that
often. " Being the named fiduciary would
involve further tasks such as hiring and
oversight of providers for the plan.
Occasionally, note Furgala and Price,
recordkeepers that are not TPAs take on a
3(16) administrator role but usually in just
a very limited capacity.
The hiring of a 3(16) administrator
can aid the plan sponsor by freeing up time
to focus on company business. " Often, the
last thing on an employer's mind is what
should be included in the enrollment kit
or getting employee census information to
the recordkeeper, " Furgala says.
According to Price, the biggest value
in hiring a 3(16) administrator is that it
keeps plan transactions clean. " If you
look at problems that arise from DOL
[Department of Labor] and IRS investigations,
most are operational failures-for
example, not making timely deposits,
or not using the correct definition of
compensation for contribution calculations
or nondiscrimination testing, "
she says. " The 3(16) administrator is not
wearing multiple hats and is a specialist. "
Just because a TPA advertises that it
is willing to serve as a 3(16) plan administrator
does not mean plan sponsors
can assume it will automatically do so. A
service contract needs to be in place.
" Within the service agreement, it has
to be clear what tasks are being taken on
by the 3(16) administrator and what will
still be the responsibility of the sponsor, "
Furgala says. " A clear service agreement
is critical in making sure both sides will
understand what they need to do. "
Price says the agreement needs to
define the role and responsibility of each
party and that sponsors should make
sure it covers their expectations. " The
agreement should spell out what the
3(16) Administration and Compliance Services
Standard
Provide plan design and consultation
Draft summary plan descriptions (SPDs)
Verify required annual employer contributions
Allocate discretionary contributions and forfeitures
Perform required compliance testing
Prepare Form 5500
Prepare participant notices and disclosures
Interpret plan document
Review fidelity bond for compliance with ERISA
Administer loan policy
Monitor loan defaults
Approve loans, hardship withdrawals and QDROs*
Approve all other distributions to participants
Determine participant eligibility
Upload census data to plan providers
Search for missing terminated participants
Mail all notices and disclosures to eligible employees
Sign and file Form 5500
Review large-plan Form 5500 and financial audits
Sign and file Form 8955-SSA
*Qualified domestic relations orders
Source: The Retirement Advantage, www.tra401k.com (list has been modified)
plan sponsor needs to provide to the 3(16)
plan administrator and the time frame
it has in which to provide it, " she says.
" If something will make the contract
null and void-such as incorrect data
provided to the 3(16)-that also needs to
be [made] clear. "
Although a 3(16) administrator takes
on fiduciary responsibility for some or all
of the administrative tasks for an ERISA
plan, plan sponsors still have the fiduciary
responsibility for hiring and monitoring
the plan administrator, Price adds.
This is true even in cases where the 3(16)
assumes the named fiduciary role.
While the named fiduciary is responsible
for the hiring and oversight of
providers for the plan, " this is misleading
in the sense that it is always the fiduciary
responsibility of the plan sponsor to select
and monitor the plan administrator, "
Furgala says. This includes deciding
which plan administrator provides the
best services for the most reasonable price
and, at least annually, checking to make
sure it is doing what the service agreement
requires, he adds.
Price notes other things to keep in
mind: Plan sponsors should be sure the
TPA-including its staff-has 3(16) plan
administrator experience. They should
also know what type and how much insurance
coverage the administrator has (i.e.,
errors and omissions [E&O] and/or fiduciary
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