As auditors and advisers to nearly 200 retirement plans, we are often asked how to select a third party administrator (TPA). Typically, the question arises as a result of a perceived dissatisfaction with the services currently being received. However, because it is such a personalized business, there is no handy formula or measure for evaluating performance. Each TPA is unique, and many are very innovative.
Here are five questions that you may wish to ask before selecting your TPA.
- What size and type of plans does the TPA handle? Different TPAs have different strengths; some firms cater to the small plan market, while others work primarily with plans with assets of more than $50 million. Some are experts on defined benefit plans and others are stronger on daily valued 401(k) plans. It is critical that the TPA’s niche fits your plan’s profile.
- Who will be assigned to my plan, and what is that person’s experience? The person you meet on the sales call may not be the person who will be working on your account. Will you be assigned a point-of-contact to handle your questions, or will questions be filtered through a call center? You should have a direct contact at the TPA to answer your call when a problem arises.
- What resources does the TPA have to support your government compliance efforts, and what are the procedures for keeping your plan up to date? Government compliance is an area of great potential risk. Government penalties can be sizable and innocent violations can be costly to the employer. Expertise in government compliance is an area where the TPA can provide significant value.
- Is there a menu of fees to be charged? With the new fee disclosure rules that became effective in July 2012, this information should be readily available. Each TPA has a different pricing system. The TPA should be able to provide a simple one page description of all of its fees. Be sure to compare apples to apples and buy the level of professionalism that you need, but avoid selecting a TPA based solely on price.
- Can the TPA provide references? A TPA should be eager to provide you with a list of satisfied clients, and you should contact those references to determine whether their situations are similar to yours. Some questions to ask include, ‘How responsive are they in returning phone calls? Do they provide reports to make your job easier? Have they been timely in notifying you of regulatory changes?’ Check with your other professionals, such as your certified public accountants, attorneys, bankers, etc., about their experience with the TPA.
Your TPA is an important partner in running your business, and there should be a high level of comfort and trust. The above questions will assist you in selecting the right TPA for your plan.
Mark G. Metzler can be reached at Email or 215.441.4600.