Third-Party Administrators Make Your 401(K) Plans And Records Safer And Easier To Handle
When you've got everything under control, managing a 401(k) plan can be simple. It might not be easy, but the process goes smoothly. However, when you manage a plan for a large company that has employees leaving, arriving, changing plans, changing beneficiaries, and generally remaining very, very active in their investing, the amount of work can become overwhelming. Add together all of the plans your company offers, and that's a lot of paperwork you have to get through, even if most of it is technically in electronic form, as you may still have to mail out confirmations. Adding a third-party administrator, or TPA, can make the job a lot easier -- and safer.
Remove the Busywork
The paperwork for 401(k)s isn't exactly unimportant. But it's true that the paperwork can be a distraction that you don't need. Instead of tying up your staff with repetitive duties, move all of that over to a TPA. Your staff already has enough to deal with and could use the newly freed-up time to take care of backlogged projects rather than filling out forms.
Expand Your Fund Offerings
With a TPA that's dedicated to taking care of the daily aspects of the funds, you may find your fund options increasing -- in other words, you'll end up with more fund types available to you -- if a fund company creates plans that allow TPA contributions. This is what happened for a lot of small businesses that use TPAs in 2011 when Vanguard created a new plan specifically for this market. Previously, Vanguard did not offer any plans to companies that used TPAs.
Have Additional Backup
Companies should always have their computer systems and files backed up in case of a problem. However, adding a TPA allows you to automatically have a backup of at least the most recent transactions. As you work with the TPA for a longer time, that backup's going to grow. While having an extra backup might not be the main reason to work with a TPA, it is a convenient side benefit. Should something happen to your records or server, you'll have another place to go to get copies of records.
You can customize what the TPA takes over and what you keep in your office. Contact 401k TPAs and speak to their representatives about how to divide up the work so that you know what's happening with the plans but aren't overwhelmed by it.