Finding the Right Third-Party Administrator: Important Questions to Ask

A great third-party administrator (TPA) truly helps employers meet their goals – selecting the best plan design for their business, maximizing savings, minimizing taxes and liability, and more. Not all TPAs are the same; some stand in exemplary light.  Increasingly complex regulations, escalating cybersecurity risks, and rising penalties for non-compliance provide ample reasoning to thoroughly vet a third-party administrator before hiring or recommending them.

How do you keep data secure?

Few tasks rank as important as keeping sensitive client data secure, especially in the retirement industry.  A good TPA articulates what measures they have in place to ensure company and participant data remains protected. Service providers should utilize secure systems and documented procedures with a proven history of data security. They are well-equipped with both cybersecurity insurance and a recovery plan for worst case scenarios.

What does your customer service look like?

A quality TPA provides a primary point of contact, dedicated to the plan and available for questions directly via phone or email.  Make sure response time meets or exceeds your standard of care.  A 24-hour or one business day response time meets best practice standards.

What services do your fees cover?

Not all TPAs perform the same services, and many vary in what services fall under their standard fees. Review the pricing proposal to determine which services come with the basic fee schedule and which services will cost extra. Also request that they clearly outline consistently recurring expenses to avoid surprises.  Services that fall outside standard fees may include contribution calculations that require testing, plan document amendments and restatements, plan audit assistance, providing plan data to other parties, individual brokerage account maintenance, data reconciliation and clean-up, plan mergers and acquisitions, technical consulting, and other unique services.

How do you keep plans in compliance?

The rules and regulations guiding retirement plans have grown more complex and varied as the awareness for retirement readiness continues to grow. Does the TPA have qualified and certified ERISA experts on staff? What are their processes for updating procedures with changing regulations? Is retirement plan administration their primary focus? Lack of expertise and focus on retirement plans may result in costly penalties and fees for the employer.

What recordkeepers and payroll providers do you partner with?

Some TPAs only work with select recordkeepers or push their preferred partners.  It’s ideal to work with a third-party administrator that has the capabilities and flexibility to partner with the recordkeeper that best meets the client’s needs. TPAs that integrate seamlessly with both recordkeepers and payroll providers create a smooth and enhanced experience for clients.

What kind of experience does your staff have?

Without credentialed, retirement plan experts, and in-house actuaries, a TPA provider might have to outsource work, generating additional fees and time lost for clients. Lack of experience and expertise could lead to plan errors, or delays resulting in missed opportunity for plan optimization. Look for a TPA with a team of qualified, credentialed, and experienced professionals.

How do you help reduce client liability and day-to-day responsibility?

Retirement plan complexities, increased fees for non-compliance, and the workload associated with sponsoring a retirement plan creates a need for 3(16) fiduciary services.  These services help remove responsibility and liability from clients, as the 3(16) provider typically takes on several administrative and compliance-related tasks associated with the plan. Having the option to add this service to ensure plan compliance and significantly reduce workload can be a great value to clients and advisors.

What type of plans do you support and service?

Does the TPA have experience in multiple plan types and sizes? Can they handle a variety of scenarios and clients? Offering a variety of plan types can lead to the best possible outcome for the client.   Inevitably, Congress modifies rules, the IRS writes new regulations, and companies grow and change through the years.  The consultant and team familiar with the retirement plan industry, the client’s plan, and the client’s company is in the best position to provide solutions to meet their needs.

What resources or training do you provide partners and clients?

A terrific third-party administrator offers you expertise in compliance and regulatory happenings and regularly communicates the impact upcoming changes have on your plan. When necessary, the TPA may provide higher-level or in-depth training to keep a plan committee up to speed. Does the TPA have resources they can share that break down various complex issues? Do they provide CE credits for partners?

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