What is a Plan Sponsor?

A plan sponsor is an entity that establishes and manages some type of retirement, investment, or healthcare plan as a means of providing benefits to members or employees. In many cases, the sponsor is a business that partners with service providers to offer employees easy access to health insurance or some type of pension plan. Organizations such as labor unions or local entities like private clubs may also create and sponsor plans that are designed to benefit members of those organizations.

When attempting to create some sort of benefit package for members or employees, a plan sponsor will often consider the underlying reasons for providing those benefits. In the case of businesses, the motivation is often to provide incentives that encourage fully trained and reliable employees to remain with the firm for longer periods of time. When and as possible, those benefits are provided with as little expense to the employee as possible. For example, a small business may sponsor a health insurance plan and pay the entire monthly premium for a single employee, while splitting the cost with an employee who desires family coverage. While the employee does pay a portion for that family coverage, the total paid under the group insurance plan is usually considerably less than he or she would pay for family coverage with a personal health insurance plan.

A trade union may also function as a plan sponsor. It is not unusual for unions to offer pension plans, or at least savings plans that offer a competitive rate of interest. Plans of this type are often desirable, since they remain intact when a member of the union moves from one employer to another, eliminating the need to roll over or convert an existing benefit.

In some cases, an association will provide benefits of some sort, such as health coverage. This is particularly true of associations that provide support to small businesses, or to people who operate home businesses, or work as freelancers for a variety of clients. Generally, the fees that the members pay for access to any benefits offered by the plan sponsor is much less than they would pay if securing those same types of benefits on their own.

Whether the plan sponsor is a large corporation providing incentives to employees, or a local association that is seeking to provide benefits at competitive prices to members, the sponsor will often evaluate numerous plans before settling on those that provide the most benefit to its constituents. Along with sponsoring the plans, the sponsor may be actively involved in the management and administration of those plans, as well as constantly considering additional benefits that can be added to the overall structure of the current plan.