The plan administrator is the party legally responsible for operating the plan, and whoever holds the role is a fiduciary.
Your plan document names who holds it. If the plan document doesn't name anyone, your company holds that role by default.
The job covers Form 5500 filing, participant disclosures, eligibility and distribution decisions, and claims and appeals.
A TPA that prepares, calculates, and processes is generally not a fiduciary. A 3(16) decides and approves, and accepts fiduciary responsibility for doing so.
Delegating to a 3(16) shifts responsibility only if your plan document provides a procedure for making that designation. Without one, the responsibility stays with you.
What Is a 3(16) Plan Administrator?
The plan administrator is the person or entity legally responsible for operating your retirement plan. ERISA creates the role, your plan document names who fills it, and if the document doesn't name anyone, your company fills it by default.
That default is where most of the confusion starts. A company can sponsor a plan for years without anyone at the company deciding to be the plan administrator, because the law assigns the role whether or not the decision gets made.
Whoever holds the role is a fiduciary. Running a plan means making judgment calls. Someone has to decide whether an employee qualifies for a hardship withdrawal, rule on a benefit claim, and interpret a term in the plan document when a situation is not clearly covered.
The "3(16)" in front of the title is a reference to the section of ERISA that defines the term. It's easy to confuse with the other numbered roles you hear about, but those are investment jobs. A 3(21) or 3(38) investment fiduciary deals with the fund lineup. A 3(16) deals with running the plan.
Most of what follows comes down to one question: for each task the plan needs done, who does it and who is responsible for it. The worksheet below sets that out task by task.
Featured Worksheet
TPA or 3(16)? A Task by Task Comparison
What a third-party administrator does, what a 3(16) plan administrator may accept, and a place to record who handles each task at your plan and where the agreement says so.
ERISA section 3(16) answers the question in three steps. The administrator is whoever the plan document specifically designates. If the document designates nobody, it is the plan sponsor. For a plan established by one employer, that is the employer. For a plan maintained by more than one employer, it is the joint board of trustees or similar group that maintains it. And if a plan has neither a designated administrator nor an identifiable sponsor, the Department of Labor can name one by regulation.
That definition does two things worth holding onto. It makes the role mandatory, because every ERISA plan has an administrator whether or not anyone chose one. And it means the plan document decides who the administrator is. Not the service agreement, not whoever does the day-to-day work, not whoever your recordkeeper emails.
What Does a 3(16) Plan Administrator Do?
The plan administrator runs the plan. The trustee holds and invests the money. Those are two separate jobs, and one person can hold both.
The administrator's responsibilities fall into four groups.
Government reporting. Filing the plan's annual report, the Form 5500, along with its schedules. ERISA assigns the filing to the plan administrator, and the DOL requires the plan administrator to sign it. The DOL also requires the administrator to manually sign a paper copy under penalty of perjury and keep it in the plan's records.
Participant disclosure. ERISA requires the administrator to furnish participants a summary plan description and the plan's other required disclosures. In practice that means the summary plan description and any summaries of material modifications, the summary annual report, participant fee disclosures, and whichever annual notices the plan's design requires, including safe harbor, automatic enrollment, and qualified default alternative investment notices. Each has its own deadline and its own delivery rules.
Plan operations. Determining who is eligible and when they enter, applying the vesting schedule, reviewing distribution and loan requests against the plan's terms, and handling qualified domestic relations orders.
Claims and appeals. Deciding benefit claims and hearing the appeal when a participant disputes the answer.
Running underneath all four is a single obligation. The DOL lists following the plan documents as one of a fiduciary's core responsibilities, and describes the document as the foundation for plan operations. Operating the plan some other way is where problems start.
How Is a 3(16) Administrator Different From a TPA?
The Department of Labor puts it in one line: fiduciary status is based on the functions performed for the plan, not on a person's title.
That matters here because a TPA and a 3(16) often touch the same task. The difference is which part of it they do. The DOL treats preparing, calculating, and processing as ministerial work, which does not make someone a fiduciary. Deciding and approving is the fiduciary act.
Task
What a TPA does
What a 3(16) may accept
Eligibility
Applies the plan's rules to your census
Decides eligibility where the rules leave room for judgment
Form 5500
Prepares the filing
Signs and files it, where named as plan administrator
Participant notices
Prepares the notices
Approves them and answers for delivery on time
Distributions and hardships
Processes the request
Decides whether it meets the plan's terms
Loans
Calculates and documents the loan
Approves it under the plan's loan policy
QDROs
Prepares the paperwork
Decides whether the order qualifies
Benefit claims
Processes the claim
Decides the claim and hears the appeal
Plan document
Follows the terms as written
Interprets what a term means when a case is unclear
Read across any row and the pattern is the same. The TPA does the work. Someone still has to make the call, and that someone is the plan administrator.
The Form 5500 row is the clearest place to see it. A TPA prepares the filing and sends it to you to sign, because the DOL requires the plan administrator to sign it. A provider named as plan administrator in your plan document signs it instead. When you hear 3(16) administrator vs. TPA, this is the difference being described.
Compliance testing sits outside the table on purpose. Running the test is a calculation, and correcting a failed one is a decision with a hard deadline behind it. Some 3(16) providers accept that decision and some exclude it, so it is worth asking about by name rather than assuming.
Both can serve the same plan at once. Adding a 3(16) does not mean replacing your TPA, your recordkeeper, or your advisor.
Do You Need a 3(16) Administrator?
It depends less on the size of your plan than on who is doing the work now and how comfortable you are carrying the responsibility for it.
When it makes sense
The case is strongest where the administrative work sits with someone who has other priorities. A controller or an HR generalist tracking eligibility, watching notice deadlines, and signing the 5500 is doing specialist work in the margins of another job, and the plan document holds them to a specialist's standard.
It is also worth considering where the plan has had operational problems, where the person who understood the plan has left, or where the company has grown past the point that informal handling was adequate.
What your plan document has to say
The DOL is explicit that hiring out is allowed. A fiduciary can hire a service provider to handle fiduciary functions, and set up the agreement so that the provider assumes liability for the functions selected.
But ERISA lets a named fiduciary hand fiduciary responsibilities to someone else only where the plan instrument sets out a procedure for doing it. Where the document has no such procedure, the DOL has said the designation does not relieve the named fiduciaries of responsibility for the acts of the person designated. The agreement alone does not move the liability. The document has to allow it.
Who makes the call is the company. Amending the plan document to name a 3(16) is a business decision, which the DOL places outside ERISA's fiduciary rules. Choosing which provider to appoint is a separate act, and that one is fiduciary, so it needs a real process behind it and a record of how you got there.
What stays with you either way
Hiring a service provider is itself a fiduciary function, so whether delegating makes sense for your company and who you choose are your decisions, along with monitoring the provider afterward.
The accuracy of your payroll and census data also stays with you, and it matters more than it sounds. Eligibility, deferrals, compensation, and testing all run off that data, so whoever is administering the plan can only be as right as what you send them.
Not All 3(16) Services Are the Same
The label tells you almost nothing on its own. ERISA defines the plan administrator role, but it does not define what a provider may call "3(16) services." The scope comes entirely from the agreement.
There are two arrangements. In one, the provider is named as plan administrator in your plan document and holds the role. In the other, it accepts a specific list of functions and you remain the plan administrator. Both are legitimate. They are not the same thing.
Take the table above into the conversation and ask the provider to mark each row. Then get four more answers in writing:
Will it be named as plan administrator in the plan document, and will it sign the Form 5500 in that capacity?
What happens if payroll, census, or compensation data arrives late or wrong?
Who pays IRS or DOL penalties, correction contributions, and professional fees if an error occurs?
What liability caps, exclusions, or indemnification terms apply?
Those last three are where a commitment that reads as absolute in a brochure turns out to be narrower in the agreement. A provider that does not run your payroll will reasonably condition its obligations on getting good data on time, which is fair enough. What you want to know is exactly where that line sits before you sign.
Read what the provider accepted in writing rather than what the relationship feels like. The worksheet below has a column for exactly that, so a blank tells you where to look next.
If you would like help reading your plan document and service agreements against that list, call us at (206) 625-1800 or schedule a call here.
Featured Worksheet
TPA or 3(16)? A Task by Task Comparison
What a third-party administrator does, what a 3(16) plan administrator may accept, and a place to record who handles each task at your plan and where the agreement says so.
Your plan document is the answer, usually in the section on administration or in the adoption agreement. Your Form 5500 also identifies the plan administrator, which is often the faster place to look. If the document names no one, it's your company.
Some offer it and some do not. What matters is not the offer but the agreement: which specific functions the TPA accepts fiduciary status for, whether it will be named in the plan document, and whether it will sign the Form 5500 in that capacity.
No. Hiring the provider is itself a fiduciary function, and you keep the duty to select prudently and monitor afterward. You also keep whatever the agreement does not cover. And if your plan document does not set out a procedure for designating fiduciary responsibilities to someone else, the designation does not shift the responsibility at all.
Not necessarily, though they are often the same entity. The plan sponsor is the party that established the plan, which for most companies is the employer. The plan administrator is whoever the plan document names to operate it, which defaults to the sponsor when the document names no one.
That depends on whether the provider is named as plan administrator in your plan document. If it is, it signs in that capacity. If it is not, you generally still sign, even where the provider prepares and transmits the filing. Ask the question directly, because the answer tells you how much the provider has actually taken on.
First Hill Trust Company is a Washington State-chartered trust company. Investment advisory services are provided by BAC Capital Advisors, an SEC-registered investment adviser and a wholly owned subsidiary of First Hill Trust Company. Registration does not imply a certain level of skill or training. This article is educational. Neither First Hill Trust Company nor BAC Capital Advisors is acting as ERISA counsel or tax counsel to any plan or plan sponsor, and nothing here replaces advice from qualified counsel about your own plan.
Accuracy and currency. Statutory provisions and regulatory descriptions in this article were checked against the cited primary sources as of the date of publication, but First Hill Trust Company and BAC Capital Advisors make no representation or warranty as to the accuracy, completeness, or timeliness of the information, and accept no liability for actions taken in reliance on it. Regulations and guidance change. Confirm current requirements with qualified counsel.
Educational purpose only. Provided by First Hill Trust Company for general informational and educational purposes only. It is not legal, tax, accounting, investment, or fiduciary advice, does not constitute a recommendation regarding any plan, investment, strategy, or course of action, and does not consider any recipient’s specific circumstances. Consult your own qualified advisors before acting.
No offer, agreement, or commitment. Nothing in this material constitutes an offer, solicitation, agreement, or commitment to provide any particular service or to assume any particular responsibility. Descriptions of what a trustee, administrator, adviser, committee, employer, or other party “may” or “can” do are illustrative of how such arrangements commonly work and do not describe the terms of any specific engagement. The actual services provided, the allocation of responsibilities, the scope of any delegation, and the duties of any party are governed solely by the applicable plan documents, trust agreement, advisory agreement, and written service agreements. In the event of any inconsistency, those documents control.
Services and regulatory status. First Hill Trust Company and its affiliates offer retirement plan services, recordkeeping and administrative services, trust and fiduciary services, investment advisory services, and group benefits services, in each case subject to applicable regulatory requirements and the terms of the relevant agreements. Not all services are offered to all clients, in all states, or in all circumstances. Investment advisory services are offered through an affiliated investment adviser; a copy of its Form ADV Part 2A is available upon request. Insurance and group benefits products are offered through appropriately licensed entities. The availability and scope of any service depend on eligibility and the applicable agreements.
Fiduciary status under ERISA. Fiduciary status under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is determined based on the functions performed and the authority exercised, not on titles or labels. Whether any particular party is acting as a fiduciary, and the scope of any related duties or potential liability, depends on the facts and circumstances specific to the plan and the relationship. Engaging a trustee, adviser, or other service provider does not eliminate a plan sponsor’s or committee’s own fiduciary responsibilities, including the duties to prudently select and monitor any party to whom responsibilities are delegated.
Affiliated entities and conflicts of interest. First Hill Trust Company is affiliated with other entities, including an affiliated investment adviser and entities providing administrative, trust, or other services. These relationships may create conflicts of interest, including where an affiliate is engaged or compensated in connection with a plan. Such conflicts and compensation are described in the applicable service agreements and the affiliated adviser’s Form ADV Part 2A; fiduciaries should consider them when evaluating any engagement.
Statutory and regulatory references. References to ERISA, the Internal Revenue Code, and related statutory or regulatory provisions are general summaries only. They are not a substitute for review of the actual statutory text, regulations, or guidance from the Department of Labor, Internal Revenue Service, or other relevant authorities, and they do not address how those provisions may apply to any particular plan, sponsor, fiduciary, or individual. Laws, regulations, and guidance are subject to change and to interpretation by the relevant agencies and courts. Examples, categories, and situations described are simplified for illustration and may not reflect the requirements or circumstances of any particular plan or person.
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