When choosing a Third-Party Administrator (TPA), employers should remember that they are hiring an entire firm and not just one person. However, since the relationship between an employer and TPA is based heavily on trust, cooperation, and partnership, you should select the right person for the job. Your TPA will design and administer the best 401k plan for your business. It will make your business not only more competitive but will also show your employees that you care about their financial future.
Before hiring a TPA, you should identify the primary requirements of your business. So, you should ask yourself some important questions like:
- How many of your employees will enroll in the 401(k) plan?
- What kind of financial resources does your company have?
- What is the age group of your most important employees?
- Who are you hoping to assist most with the new retirement plan?
Once you figure out the answers to these questions, you can determine the type of TPA that would be best for your company’s 401(k). For instance, if you are self-employed or have only a few employees in your company, you can hire a payroll company to provide TPA services. On the other hand, if you have a relatively large number of employees, you can benefit more from a specialist in plan administration.
Setting up Your 401(k)
The right TPA can help you set up a 401(k) that best suits the needs of your company as well as your employees. Although the legal steps for setting up such a plan may look complicated at first, your TPA can handle it all conveniently if he/she has the expertise. While setting up the plan, your TPA will arrange the installation of the plan and support you in customizing it to meet your needs.
Your TPA will be responsible for drafting plan documents and communicating with your employees. It will help ensure that your company is compliant with the latest rules and regulations. That is why you should select a TPA that is reliable and commits no errors. Setting up a 401(k) plan involves working in a complex area of rules and regulations that you can’t constantly monitor. So, your TPA should offer a consistently high standard of service.
Ensuring Effectiveness of Your TPA
A good communication network between the employer and plan administrator helps in ensuring that the right 401(k) plan is adopted and customized to fulfill your company’s needs. As an employer, you should maintain a healthy communication channel with the TPA so that he/she can take into account and address any potential changes that may impact the plan. It will help you meet your employees’ retirement goals as well.
Apart from good communication, there are some other factors that determine if your TPA is doing a good job. First, you need to check whether your TPA is charging the appropriate fees for the services or not. Their charges should be at par with the market rates. If your TPA is overcharging, you should try to negotiate more favorable terms.
Additionally, your TPA should have sufficient experience and expertise to respond proactively to potential problems. It is estimated that injuries at work in the United States accounted for nearly $53.9 billion in wages and productivity in 2019. If your TPA can educate your employees about the best safety practices and help you adopt safety programs, you can bring down the number of claims made each year.
If you are trying to set up a 401(k) plan for your employees, you should hire a TPA company that has relevant experience, know-how, product offerings, and expertise. They will efficiently handle all your 401(k) goals including retirement plan establishment, operation, and administration service requirements.