Why an Unbundled TPA is Better for a Defined Contribution Plan
If you have a qualified employer sponsored defined contribution retirement plan, you need 3 types of services: investment, recordkeeping and administrative. In a bundled arrangement, these services are provided by the same organization, usually the record keeper or investment platform. At first glance, having one provider might seem like an effective and cost-saving solution, but having an unbundled TPA (Third Party Administrator) is better for the following reasons:
- Better Plan Design
A TPA will work closely with the plan sponsor to design a plan that is custom tailored to fit the company’s goals and objectives. TPAs specialize in ERISA requirements and can recommend a sophisticated plan design with greater flexibility.
- Better Services
TPA firms generally employ highly educated and experienced staff who keep up to date with compliance and regulatory issues. A TPA has a greater interest in your plan, therefore plan sponsors receive proactive administration and guidance.
- Better Administration
The TPA’s job is to preserve the plan’s qualification status. Qualified plan rules are quite complex and include running compliance testing, reviewing and calculating contributions and preparing tax forms. A good TPA will review data, reduce errors and prevent compliance mistakes.
- Better Communication
A TPA can communicate changes in the law, recommend plan design changes, foresee future problems and offer creative solutions. When the employer calls the TPA with a question, they speak with a dedicated professional who is familiar with their plan.
- Better Fee Transparency
The TPA fees are transparent and the employer has the flexibility to decide if the fees will be paid through the plan (as part of the plan assets or from the participant accounts) or pay them outside of the plan and deduct the full amount as a business expense.
Qualified defined contribution plans are most effective when they are designed to meet the objectives of the employer and their employees. Watkins Ross is an unbundled TPA servicing defined contribution plans (401(k), 403(b), ESOP, etc.), as well as actuarial and administrative support services for defined benefit plans and post-retirement medical plans. Please contact us if you are interested in receiving a quote for our unbundled TPA services or have any questions regarding our services.
Related Articles You Might Like
In July 2020, the IRS announced employers with pre-approved defined contribution retirement plans (401(k), profit-sharing, and money purchase plans) will need to have their retirement plan documents rewritten within the next two years. The deadline to do so is July...
Department of Labor (DOL) rules require that employers deposit retirement plan participant deferrals as soon as administratively possible. For small retirement plans (under 100 participants), this is typically a timeline of 7 business days. Large retirement plans (100...
A common operational failure for retirement plans is when plan sponsors fail to apply the correct definition of compensation for retirement plan testing and benefit allocation purposes. Using an incorrect compensation total can impact the average deferral percentage...