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You Really Should Work with a Third Party Administrator

third party administrator

You Really Should Work with a Third Party Administrator

Whether you are thinking of starting a retirement plan for your business or are reviewing an existing plan, the most important fact you should know is: You are a Fiduciary.  This is true even if you are using an investment provider that also does participant recordkeeping or if you have an investment advisor who selects investments for the plan.  Despite having an ERISA attorney draft your plan document, under ERISA, you remain a “Named Fiduciary.”  If that concerns you, it should.  That may be the best reason you should include a knowledgeable retirement third party administrator (TPA) as part of your administrative team.  Why?  Because a TPA has the specialized knowledge to review and monitor plan compliance and can suggest ways to set up a retirement plan designed to save you money while satisfying your and your employees’ goals, and minimizing your fiduciary risk.  In fact, many investment advisors and providers prefer working with a TPA.

Plan Sponsors are ultimately responsible for the selection and monitoring of both the appropriate investments and the administration of their retirement plans.   Your investment advisor can help you with the plan’s funds, and your recordkeeper can make sure that participants’ money is where it should be.  Your attorney can make sure your plan document remains in compliance with the tax and ERISA requirements and can answer questions as they arise. However, none of these service providers is the best source of day-to-day advice about your plan’s operations.

A TPA gives you confidence that your plan is working correctly.

Think of your TPA as the Elmers™ Glue that holds your retirement plan – in all its various pieces — together.

Working with a TPA early on begins a dialogue that includes designing or customizing a plan that meets legal and regulatory requirements but also provides the benefits you hope to achieve for your business and your employees by focusing on solutions and not products.

As a TPA’s primary focus is plan administration, he or she can provide the practical answers you and your advisors need regarding plan compliance, administration, and innovative design options.  TPAs are your advocate and will help you navigate the complex rules and provisions applicable to your plan.  Most importantly, when you, as the plan sponsor, make mistakes, TPAs commonly identify and correct them.

If you already offer a retirement plan and have decided to move to a new investment provider and/or recordkeeper, using a TPA often allows for faster and more accurate plan implementation. The TPA may assist in gathering information from the prior recordkeeper and administrator, reviewing current and new plan documents to ensure an accurate transfer of plan provisions, and suggesting changes that might make administration easier or more attuned to your organization’s needs.  The TPA coordinates with the provider’s implementation team, you, and the advisor to get your new plan operational as quickly and smoothly as possible increasing participant satisfaction and minimizing distractions for your business.

Offering a retirement plan is an excellent way to attract and retain good, loyal employees. By working with your product provider, your investment advisor, and all other professionals involved in the retirement plan, a TPA can coordinate the plan’s activities seamlessly to increase participant satisfaction and confidence.  TPAs are commonly, “platform neutral” and can work with your financial advisor in conjunction with any investment platform you choose.

In short, the TPA will work to create and maintain a retirement plan, assure the plan is compliant and will become someone with whom you can work in an ongoing relationship.

Using a retirement TPA provides a higher level of confidence that plan compliance, accuracy, and day-to-day operations are being handled in accordance with regulations. The TPA’s role also includes plan and participant level oversight and reconciliation, plan compliance, and overall support of the administrative fiduciary responsibility for the plan.  Most errors occur in plan administration, such as discrimination testing, distributions and loans, eligibility calculations or interpretations of the legal plan document. When TPAs assist you in plan compliance, these tasks are performed by people who spend every day doing this work and, therefore, live and breathe the rules that apply to these processes.  Because of a TPA’s practical experience, he or she can be integral to creating and monitoring the plan, discussing options and issues that arise, and confirming that the detailed reconciliation provided ensures that the plan funds are properly accounted for.

Why is including a TPA your best option?

The TPA offers you, as the plan sponsor, your plan, and its participants greater protection from potential problems or issues.

  • The TPA works for you and reports back on any discovered plan issues. Many clients prefer a personalized solution where the advisor and TPA partner with the investment provider.
  • Many businesses recognize the value of additional oversight, regular compliance review, and the assurance that participants receive accurate accounting of their funds. Your company gets the necessary protection for everyone involved.
  • The TPA will help design the optimal plan, making sure it is a good “fit” for everyone and will see that the plan is implemented expeditiously and accurately and maintained in compliance throughout the year. The TPA also serves as a relationship manager, answering your questions and providing guidance so things run smoothly.
  • Many of the providers that are most prominent in your market segment find over 75% of their new plans involve a TPA and often encourage plan sponsors to use one.

What about Fees?

TPAs offer an invaluable service for a reasonable fee.  Similarly to your accountant or attorney, TPAs are compensated for the professional services they perform for you and your plan.  These fees are often the same – or less – than what you would pay through revenue sharing in a bundled program, where you generally receive less personal attention and expertise. Even if the cost of having an independent TPA is a bit more expensive, the quality of the TPA’s services can provide significant peace of mind that your plan is being carefully monitored for both legal compliance and the fulfillment of your expectations.


Having a TPA rounds out your advisory group so that the practical aspects of plan design are considered, activities throughout your plan’s lifetime are coordinated, plan compliance is monitored by someone whose job centers on that task, and you have a resource and advocate that will become indispensable.


Mike Bourne is the managing partner for Atéssa Benefits, a TPA firm specializing in defined benefit (DB) plan administration and ERISA Compliance.  He is also a partner in MB Actuarial Services, which provides outsourced services to over 700 DB plans for other TPA firms.  Both firms are located in San Diego, CA.  He is also a CPA and an MBA from the University of Chicago.

Ilene H. Ferenczy, J.D., CPC, APA, is the Managing Partner of Ferenczy Benefits Law Center, an employee benefits law firm in Atlanta, Georgia.  She advises clients on all types of employee benefit plans, particularly focusing her practice on qualified retirement plans, benefits issues in mergers and acquisitions, and advising third-party administrators of employee benefit programs on technical and practice issues. 


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