Most businesses choose to outsource their employer-sponsored retirement plans. Beyond selecting the financial advisor and the plan that is best suited for the company, employers also should look at how the plan is going to be maintained and kept in compliance. A company that specializes in this, referred to as a third-party administrator (TPA) can be a real asset.
Rather than picking the first firm that shows up in the Google search, it is important to do research and ask questions to see if hiring a specific TPA is the right fit.
Unless there is someone dedicated to making sure your plans is up to date, the plan could be subject to error. For instance, IRS and Department of Labor regulations frequently change. Having someone who is on top of these changes can save money in the long run by not having to go back and fix an error or pay penalties.
Management and administration of retirement plans can be a time-consuming process. The Internal Revenue Code requires several tests throughout the year to make sure plans do not discriminate in favor of employees with higher incomes. This task alone can be difficult for someone with other responsibilities in the office.
At Benefits Administrators, we have worked with 700 clients ranging from small, local businesses to large, multi-location corporations. For instance, we manage a 401(k) plan that has about 15,000 participants and provide services for another client with about $500 Million in assets. On average, it takes about 80 hours to make sure one plan is kept in compliance, managed and up to date throughout the year. Keep in mind that average does not factor in any time for changes or employee turnover and it’s more for larger, more complex plans.
We have found that our availability to clients is one of the most important considerations when clients choose us as their TPA firm and it is why they continue working with us. We have a team of people for each client so someone familiar with their plan is always there in their time of need. We tell them that we are a phone call, text or, for those in downtown Lexington, just a few blocks away.
These questions are not exhaustive but certainly can help you start having a conversation about selecting a TPA. Should you have additional questions, one of our team members would be happy to help.