The Retirement Plan

Employer-sponsored retirement plans encourage employees to save for retirement by investing in their future now. But beyond the obvious benefits of pretax savings, diverse investments, advisory support, online access, and Roth features in many retirement plans; employers should look at how the plan is maintaining its compliance – its compliance with IRS and DOL regulations. Anyone, from the CFO and HR manager to the guy in the mail room can tell you if there is a Match offered, but if you ask which nondiscrimination test is performed annually to ensure compliance under IRC Section 401(m) you might get a “huh?” instead of an answer, which is ok, you’re plan has a TPA right?

Put another way, you may not know how to change the oil in your car but you know where you can go to get it done properly. It’s the same with a retirement plan. The plan sponsor (the Fiduciary) should look for qualified firms to fill in where needed; leverage a financial advisor for complex investment questions and consult with a TPA, like Uniglobal, to mange the compliance and administration.

It is important to note that one cannot be an expert in all things but can source experts to assist.

What is a TPA?

A Third Party Administrator (TPA) works with employers on their retirement plan objectives, such as establishing a 401(k). The TPA is retained by the Plan Sponsor to perform critical tasks required to maintain plan compliance.

Why should I consider using a TPA for my 401(k)?

A qualified retirement plan, in additional to being for the benefit of the plan participants and their beneficiaries, must perform certain testing, reporting, and disclosure functions to be qualified. A TPA will work with Plan Sponsors to assist them in performing their duties to the plan. The services that a TPA generally will perform are:

• Plan Design and Document Services
• Non-discrimination Testing
• Employer Allocation Preparation
• Account Reconciliation Services
• Notification Creation and Distribution
• Valuation Reporting
• Government Filing Services

While not all Plan Sponsors select a TPA, the benefits of using one could help the Plan Sponsor avoid costly mistakes.  

How do I select the right TPA?

TPA services can vary. Selecting the right one for your retirement plan comes down to asking questions, a lot of questions:

• Does the TPA offer financial advise (aka are a “producing” TPA)?
• Does the TPA hold the assets of the plan (as a recordkeeper with daily valuation services)?
• Will the TPA provide support in designing the right plan for your company?
• What qualifications do the administrators hold?
• How long has the TPA been in business?
• Are there any conflicts of interest? Do they prepare the 5500 and audit it as well?
• Does the party introducing you to the TPA have any concerns?
• Does the TPA have clients that are in a similar line of business as you?
• Is the data collected by the TPA secured?
• What are the expenses?

While cost is an important factor, you should review the expenses with the associated services. Ask yourself: Are we receiving value for the cost?

A Final Thought

Selecting a Third Party Administrator for your retirement plan is one of the ways you can keep on track with your fiduciary responsibilities.