Running a small business is rewarding, but it can also be demanding. Among the myriad of responsibilities on your plate, managing your employees’ retirement plans can be one of the most complex. Thankfully, a Third-Party Administrator (TPA) makes things easier. 

The upsides of partnering with a TPA are numerous and far-reaching. Below, you will learn all about the integral roles TPAs play, the key distinctions between plan administrators and TPAs, and the significant benefits of using a TPA’s services. 

What Are Third-Party Retirement Plan Administrators?

TPAs are external experts. They handle the administrative tasks related to retirement plans. Their services can take a major weight off your shoulders. By managing aspects of your employees’ retirement plans, TPAs free up your time to focus on growing your business.

Not only do TPAs save you time, but they also help keep you legally compliant. They stay up-to-date with frequently changing retirement plan regulations. You can breathe easier knowing your retirement plans are in line with the current laws, reducing your risk of penalties. 

What’s the Difference Between a Plan Administrator and a TPA?

As a small business owner, it’s important to understand the roles of a plan administrator and a Third-Party Administrator (TPA) in the context of retirement plans. Although their titles might sound similar, they play distinct roles in managing your employees’ retirement plans.

The plan administrator is often an individual or entity within your organization, sometimes even the business owner themselves. This role is typically responsible for the day-to-day management of the retirement plan. This can include making decisions about plan design, selecting service providers, and ensuring the plan complies with regulations. As a plan administrator, you are the primary fiduciary, responsible for acting in the best interest of the plan participants.

Even with a TPA, the ultimate fiduciary responsibility still lies with you, the plan administrator. A TPA assists you in carrying out your responsibilities effectively and in compliance with regulations, but it does not replace your role. Essentially, you’re still the captain of the ship, but the TPA serves as an experienced guide to help you steer through complex waters.

The TPA is an external organization that you hire to handle specific administrative tasks related to your retirement plan. TPA services can vary, but they commonly include maintaining retirement plan documents, testing for discrimination, calculating plan participant benefits, and preparing government reports.

Why Use Third-Party Retirement Plan Administrators?

In the dynamic world of business, it’s critical that you stay adaptable and leverage expert help. With the services of a Third-Party Retirement Plan Administrator (TPA), you’ll be provided with assistance covering a variety of your business needs. Below, you’ll take a deeper dive into the specific ways a TPA can aid you and your company. 

They Keep You Compliant

Complying with retirement plan laws can be daunting. You have to navigate complex legislation, and failure to do so can result in hefty penalties. TPAs ensure your business remains compliant. They’re experts in retirement plan regulations and monitor any changes that occur. You won’t have to worry about being on the right side of the law.

By using a TPA, you’re protecting your business and your employees’ retirement plans. You don’t need to keep up with the latest laws or worry about potential legal issues. Your TPA has you covered.

1. They Save You Time and Money

Time is a precious resource when you’re running a small business. Every minute you spend on retirement plan administration is a time away from growing your business. TPAs can take over this role, which frees you up to attend to the things that matter most.

Along with saving you time, TPAs can also save you money. By managing your employees’ retirement plans efficiently and effectively, TPAs can help reduce administrative costs. They can also help you avoid penalties by keeping your plans compliant. So, while there’s a cost to hire a TPA, the potential savings and peace of mind they offer can make it a worthwhile investment.

2. They Provide Personalized Services

Each business is unique, with its own set of needs and challenges. Recognizing this, TPAs provide personalized services tailored to your business. They work closely with you to understand the needs of your objectives, the profile of your employees, and the specific requirements of your company.

This personalized approach means you get a retirement plan that works specifically for your business. You’re not just getting a one-size-fits-all solution. Instead, your TPA will create and manage a plan that aligns with your business goals and the needs of your employees. This customization ensures your staff members get the most from their retirement plan, enhancing their job satisfaction and loyalty.

3. They Provide Employee Education and Support

Your employees may have questions or need guidance about their retirement plans. Providing this support can be time-consuming and requires a solid understanding of the plans. This is another area where a TPA can help. They provide education and support to your employees, helping them make informed decisions about their retirement savings.

Your employees can directly contact the TPA for their queries. This way, you’re not only providing a valuable service to your employees, but also freeing yourself from the responsibility of answering complicated retirement plan questions. It’s a win-win for you and your team.

4. They Offer Audit and Reporting Support

If your company is selected for a Department of Labor (DOL) or Internal Revenue Service (IRS) audit, a TPA can be a lifeline. They know exactly what these agencies are looking for and can provide the necessary documentation and support. This expertise can make the audit process smoother and less stressful.

Moreover, TPAs also take care of regular reporting duties. They are experienced in handling paperwork, maintaining records, and preparing annual reports. By having a TPA manage these tasks, you’re ensuring accuracy and timeliness in your reporting, and freeing yourself up to focus on your core business operations.

5. They Prepare and Amend Plan Documents

Retirement plans require comprehensive documentation to ensure legal compliance and good communication with your employees. Your TPA handles this responsibility, preparing detailed plan documents that capture all essential aspects of the plan. These experts understand what needs to be included in these documents to ensure clarity and compliance.

Moreover, as the regulatory landscape changes or your business needs evolve, your retirement plan documents may need amendments. TPAs are adept at keeping up with these changes and can amend your plan documents accordingly. This takes the burden off your mind and ensures your plans stay up-to-date.

6. They Prepare Quarterly Employee Statements

Keeping your employees informed about their retirement plan status is crucial. TPAs streamline this process by preparing quarterly employee statements. These statements provide a clear and concise summary of individual employee account balances, contributions, and investment earnings.

Having a TPA handle this task means you’re providing consistent, accurate, and timely updates to your employees. You’re ensuring transparency and boosting your employees’ confidence in their retirement plans. 

7. They Complete Annual Nondiscrimination Testing

To comply with regulations, your retirement plans must undergo annual nondiscrimination testing. This testing ensures your plans don’t favor higher-income employees over lower-income employees. TPAs have extensive experience conducting these tests.

By leveraging a TPA’s expertise, you’re ensuring your plans comply with nondiscrimination requirements. You’re mitigating the risk of penalties and maintaining the tax benefits associated with compliant retirement plans.

8.They Produce Distribution and Loan Paperwork

When your employees want to make withdrawals or loans from their 401(k) plans, they’ll need the proper paperwork. Your TPA handles this task, producing accurate and timely distribution and loan documents. This service improves the employee experience by making the process straightforward and efficient. It also alleviates the administrative demands on your end.

Find Your Third-Party Retirement Plan Administrators Today

At Fischer Investment Strategies, we understand the crucial role of a Third-Party Administrator (TPA) for your small business. As your TPA, we provide expert administrative support for your employees’ retirement plans, liberating you to concentrate on what your business needs the most. 

We ensure your plans remain compliant with constantly changing regulations, reducing the risk of penalties and boosting your peace of mind. We also tailor our services to match the unique needs of your business. You will have personalized help with maintaining retirement plan documents, mandatory nondiscrimination testing, and preparing essential government reports. 

Furthermore, we offer your employees support and education, empowering them to make well-informed decisions regarding their retirement savings. And should you face audits by the Department of Labor (DOL) or the Internal Revenue Service (IRS), we provide the necessary documentation and support to make the process smoother.

Lastly, you should know, we take ethical pricing seriously. Our retirement plan advisory fee is based on a flat rate or a percentage of investments under management, ensuring complete transparency. Partnering with us not only safeguards your compliance and promotes efficiency but also supports your employees with well-managed retirement plans, all for a straightforward, transparent fee. 

We’re here to simplify your entrepreneurial journey, offering value in both time and financial savings. Reach out to us directly at our Westlake office at (805) 418-7686, or our San Clemente office at (949) 433-7768. Feel free to also schedule a complimentary consultation at a time that works best for you. 

Ted Fischer

Financial Advisor at Fischer Investment Strategies | Website | + posts

Ted Fischer is a Fee-Only Certified Financial Planner® & fiduciary, and the founder of Fischer Investment Strategies.

Drawing from more than 25 years of experience in the financial services industry, Ted's expertise includes retirement planning, investment analysis, tax planning, estate planning, and insurance.

Ted has an extensive academic background. He received his Certified Financial Planning (CFP®) designation from UCLA in 2011. He became a Qualified Plan Financial Consultant (QPFC®) and an Accredited Investment Fiduciary (AIF®). Ted has a Bachelor of Science in Marketing, with a minor in Finance, from San Diego State University.

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