What services do TPAs provide for retirement plans?
As retirement plans become more complex, plan sponsors and financial professionals are turning to third-party administrators (TPAs) for support. TPAs can take on plan administration and compliance tasks—such as testing, filings, and SECURE 2.0 implementation—while also providing strategic consulting on plan design, fiduciary oversight, and longevity preparedness. Understanding their range of services can help you decide what kind of TPA partnership is right for your business.
Key takeaways
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TPAs help make retirement plan administration and compliance easier
Retirement plan sponsors and financial professionals face growing administrative, compliance, and fiduciary demands. TPAs provide foundational services that can make it easier and more efficient to manage the challenges of running a retirement plan.
TPA foundational services
| Challenge | How a TPA helps |
|---|---|
| Maintaining plan compliance | Conducts nondiscrimination testing, monitors legislative and regulatory changes, prepares and distributes participant notices, and recommends corrective actions |
| Performing daily administrative tasks | Handles the routine, day-to-day tasks required to run a retirement plan, such as processing enrollments, managing contributions, updating records, and coordinating payroll deductions |
| Managing the implications of SECURE 2.0 | Tracks, reviews, and interprets the new rules and options introduced in the SECURE 2.0 Act—such as automatic enrollment and Roth contributions—and helps guide plan sponsors in making changes and maintaining compliance |
| Integrating payroll and plan data | Helps streamline workflows and eliminate redundancies by sharing payroll, census, and other data between payroll providers, plan sponsors, and recordkeepers |
| Documenting and filing reports | Keeps essential plan documents, helps prepare for audits, and completes and files ERISA-required forms, such as Form 5500 |
TPAs offer plan design, business consulting, and fiduciary guidance
Many TPAs also serve as strategic partners, providing consulting services that help plan sponsors and financial professionals address business challenges, optimize plan design, manage fiduciary responsibilities, and support better participant outcomes. These services may include:
- Optimizing plan design—Collaborates with plan sponsors, financial professionals, and other key stakeholders to evaluate and recommend plan features and technology solutions aimed at creating a competitive, customized retirement offering.
- Preparing for longevity—Partners with financial professionals, plan sponsors, and other service providers to recommend plan enhancements, such as eligibility, match formulas, and financial wellness incentives, to encourage stronger savings behaviors and help prepare participants to live longer in retirement.
- Sharing fiduciary responsibilities—May serve as an ERISA 3(16) plan administrator, making daily administrative decisions for the plan, or act as an ERISA 402(a) named fiduciary, giving the TPA discretionary authority to hire and oversee service providers for the plan.
- Partnering with experts—May lead to new business opportunities by bringing together key stakeholders, such as plan sponsors, financial professionals, recordkeepers, and payroll providers, to create a coordinated, seamless plan experience.
How to find your TPA partnership
The decision to partner with a TPA depends on factors such as your business size, growth objectives, risk tolerance, and regulatory requirements. For example, small businesses subject to state retirement plan mandates may prefer to outsource as many plan responsibilities as possible. Because TPAs offer varying levels of service and support, plan sponsors can work with their financial professional to find the TPA best aligned with their business objectives and workforce needs.
FAQs
Why do employers hire a third-party administrator?
Employers hire TPAs because running a retirement plan is complex and resource-intensive. TPAs provide foundational services in administration and compliance and increasingly act as strategic partners in plan design, helping sponsors create plans that support retirement readiness, financial wellness, and longevity. By outsourcing operational and, in some cases, fiduciary responsibilities, sponsors can focus more on workforce strategy while TPAs help ensure the plan is effective, compliant, and outcome-driven.
What does a third-party administrator do for a 401(k)?
A TPA typically provides day-to-day support for 401(k) and other retirement plans, focusing on administration, compliance, and plan design. They help plan sponsors interpret regulations, structure plan features, and manage operational tasks. Additionally, they may provide more in-depth consulting services and fiduciary support.
Does a TPA act as a fiduciary?
Some TPAs choose to act as ERISA fiduciaries, such as 3(16) plan administrators who are responsible for key administrative tasks, or 402(a) fiduciaries who hire and review service providers for plan sponsors. In these roles, TPAs assume defined responsibilities and liability under the service agreement, allowing plan sponsors to outsource portions of plan oversight and governance. Not all TPAs are fiduciaries; it depends on their services and contracts.
How does a TPA help with retirement plan compliance?
TPAs play a central role in keeping retirement plans compliant. They focus on administration and compliance, help plan sponsors interpret evolving regulations and legislation, and make informed plan design decisions that align with ERISA and other requirements.
Important disclosures
Important disclosures
This is not intended to be an exhaustive review of one’s fiduciary duties under ERISA. The objective is to highlight the key responsibilities of a plan fiduciary and present the challenges that plan fiduciaries may face in discharging their duties. John Hancock is not in a position to provide you with legal advice concerning your plan or your role as plan fiduciary, and the information included herein should not be taken as such. If legal advice or other expert assistance is required, please consult your legal counsel.
Plan administration, compliance and other services provided by a TPA are subject to the terms and conditions of the service agreement with the TPA.
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