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What Is a Retirement Plan TPA?

August 10, 2015 By Shane Roberts

Beautiful image of the horizon.Retirement plan TPAs (Third-Party Administrators) assist employers in managing their employee retirement plans. This takes away a lot of the stress and work associated with designing and implementing a company-wide retirement plan. A TPA also ensures that you (the Plan Sponsor) are in compliance with all legal regulations for your organization’s employee retirement plan.

Keep reading to learn what a retirement plan TPA does and whether you should hire one.

What Does a Retirement Plan TPA Do?

Companies with employee retirement plans often hire a retirement plan TPA to deal with various aspects of their ERP. A TPA acts as both a consultant to advise employers on the design and legality of their retirement plan, as well as a liaison between the Plan Sponsor (the employer) and the record keeper who holds the plan’s assets.

Benefits of Hiring a TPA

There are two main benefits of hiring a TPA:

  1. Makes sure your plan complies with the complex employee retirement plan legal requirements set by the Department of Labor and Internal Revenue Service
  1. Helps you create a well-designed plan that both makes employees happy and meets company goals

A smartly executed employee retirement plan that fulfills all legal obligations can ultimately reduce employer costs — depending on plan design, the company owner can save more in income taxes than it pays out in plan contributions. You could also save costs in the form of potential lawyer bills and penalties incurred by having an employee benefit plan that doesn’t meet DOL and IRS requirements

Do I Need a TPA?

Not every retirement plan sponsor needs to hire a TPA — some employers have “bundled” plans, where the record keeper (the 401k plan custodian) both holds the plan assets and implements the plan design. Whether you need to hire a TPA will depend on various factors, such as:

  • Whether your plan’s record keeper will give you a discount if you use TPA services
  • Whether your plan’s record keeper is responsive to questions regarding plan compliance
  • How knowledgable about design, legal responsibilities, etc., your record keeper is

This short article from 401khelpcenter describes some specific TPA services and might help you determine if you need to hire a TPA. Those in Salt Lake City or Logan, Utah can also contact us to discuss whether your plan would benefit from a TPA.

How Much Does a Retirement Plan TPA Cost?

This depends on the scope of your plan and the TPA. At Cook Martin Poulson, we base fees on the number of eligible plan participants, combined with a base fee. For example, depending again on the specifics of your particular plan, we might charge a base fee of $650, plus $15 for each eligible plan participant.

Conclusion

An employee retirement plan provides a lot of value for employers. Not only does it foster a sense of loyalty among employees, but it can also save employers money in the form of tax deductions. It’s important, however, that your plan is managed by an expert who will make sure the plan minimizes employer costs and is in compliance with federal laws.

To learn more about you could benefit from our SLC TPA services, check out our retirement plan TPA services page, which has further information and FAQs.

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Shane Roberts

Shane Roberts

Since his dream of playing in the NBA didn’t quite pan out, Shane went with his second career choice and became a CPA. After spending two years working in industry for public and private companies he made the move to Cook Martin Poulson and public accounting, and has loved every minute of it.

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