Who Owns the Company’s Retirement Plan?

Who “owns” a company’s retirement plan? On the one hand, employees own the balance within the plan; on the other hand, it is the employer’s plan, so they would be the owner (sponsor) and have responsibility for administering the plan. Inside of that answer, there is another question: who within the employer owns the responsibility for overseeing and administering the plan? This answer, too, can be split two ways. Oversight likely belongs to the plan administrator and any plan committee, but administration, in practice, may be a joint responsibility of human resources and the finance department. Answering these ownership questions is important resolving territorial conflicts or dropped balls before they occur.

Human resources and finance are distinct entities within a company. There are many areas, however, where the lines are blurred between the two – such as regular payroll, budgeting, and compensation adjustment calculations. Go ahead and add retirement plans to this list.

The two departments generally focus on their own duties and tasks, but there can be a benefit to the company and its employees when the two areas partner and collaborate. The administration of the company’s retirement plan, 401(k), or 403(b), is an area ripe for collaboration between human resources and finance. Human resources typically handles the employee benefits and communications angles, while finance manages the financial aspects. When the two work in harmony rather than fighting over ownership, it creates a holistic approach that betters the outcomes.

When the two departments collaborate on frequently occurring administrative items, a natural communication arises, as do checks and balances. This can ensure compliance with regulatory requirements and reduces risk, penalties, or legal issues. Some items include employee support, tracking of participation, deferrals, loans, payroll contributions, and funding. Collaboration on these will also minimize disruption for employees. Regularly occurring communication and collaboration at the administrative level provide a solid foundation for the times of year when large compliance initiatives (such as plan audits and 5500 filings) occur. Having a well-developed partnership will ensure these processes go much smoother and promote quicker resolutions through joint problem-solving.

A deeper look into some of the compliance aspects of a plan highlights how important this partnership can be. Often, the retirement plan audit and tax-compliance aspects are the biggest time burdens over the course of a year. It may take a few months to complete both, which are interdependent of each other. The audit and 5500 filing involve more than the heads of human resources and finance; rather, it will include multiple team members in each area. The detailed testing of plan data can be shared between financial computations/payroll reports to the nonfinancial aspect that human resources “owns” (years of service, vesting percentages, etc.). If the finance department attempted to take on the audit alone, it would put an unnecessary burden on that team, who may not have access to some of the records necessary to properly address an auditor’s questions. An example of this would be potential plan amendments and documentation honoring previous benefit service for events such as a merger or acquisition. These are often documented in human resources or specific employee files.

While the retirement plan is a benefit that most often resides under the human resources umbrella, an alignment and partnership with the finance department on strategic items such as plan design, regular plan reviews, and employee communication are key in ensuring the initiative is successful. Have the appropriate representatives present during a plan review so there is shared knowledge and awareness of the overall state of the plan and the investments selected. This is crucial to the success of all long-term initiatives.

Partnering on plan design will give human resources an opportunity to bring forward perspectives gleaned through market trends, internal surveys, and feedback obtained directly from employees. The finance department will bring forward its analysis and insight into what would be sustainable from the company’s perspective. Without a true partnership in the area of plan design there is a risk of changes being made to the plan that are either not favorable to the employees (which could affect retention and engagement efforts) or are potentially not sustainable for the company. This is where joint ownership and collaboration ensure that the plan will remain viable and relevant over time, benefiting the employees and the organization. Human resources will then communicate any plan changes and details to the employees and ensure that they understand their options.

There are a lot of areas in business where territorialism and ownership claims can get hot and nasty. But with company retirement plans, collaboration and partnership between human resources and finance is crucial to success and efficient administration. Joint ownership allows for the full combination of financial expertise with employee-centric communication and support. At its best, the partnership will result in a compliant, sustainable, well-managed, and valuable benefit for employees and the company. 

Nicole Jankowski, SPHR, SHRM-SCP, is a senior manager, human resources, for RKL in Wyomissing. She can be reached at njankowski@rklcpa.com.