Here at ADMIN, we receive a generous number of questions from a variety of people within the retirement planning industry. Whether its financial advisors looking for education on upcoming regulation changes or potential clients trying to learn more about who we are, the demand is there and we are always willing to help.
For some time now, we have considered creating a FAQ for our blog, which we thought could be used as a reference for some of the more recurring questions that we see. Then we had an idea. Why not shake things up and turn this into a blog series? Good idea ADMIN team! Over the next few weeks we will be sharing a Frequently Asked Questions (FAQ) series here on the blog. Each post will be dedicated to the common questions we receive from those working in retirement planning.
This week we are taking a look at the different types of TPA firms that are available for employer sponsored retirement plans: What are the differences and what services are offered by each?
TPA firms tend to fall into one of two categories: Free TPA or For-Fee TPA.
A majority of ‘Free’ TPAs are affiliated with or directly owned by an investment company. These firms will manage the investment options for the plan and because they are making a return on those investments, they are willing to include complimentary TPA services on the plan as well. While the idea of free seems enticing, it’s important to consider how much administration is provided with these firms as well as the possible conflict of interest (especially for retirement plans with multiple vendors.) More often than not, these TPAs cannot support a multiple provider retirement plan and some will only provide a plan document without any maintenance on that document or additional compliance administration.
Contrary to Free TPAs, a For-Fee TPA will bill an employer for the administration services on their plan. While there are some For-Fee TPAs affiliated with investment companies, majority of the TPA firms that fall into this category are independent. These third party administrators offer a much broader range of services than a Free TPA including daily administration, plan recordkeeping & compliance, plan document design & maintenance, as well as data aggregation service for those plans with multiple vendors. ADMIN Partners is one of these for-fee independent TPAs.
An independent TPA firm will not offer any investment products or investment advice to the retirement plan that they service. They are also not affiliated with a firm who can offer investments to the plan. Independent TPAs keep their focus on the compliance and operations of the plan while allowing the Financial Advisor to take the lead on the investment options available to the participants of the plan.
Being vendor neutral means that the TPA will openly work with almost any investment provider the organization chooses for their retirement plan. Using a vendor neutral TPA creates options for the plan and allows the employer to search for the investments that work best for their organization. It also eliminates any conflict of interest for plans that want to have multiple providers within the plan.
Stay tuned: Part three of our FAQ series will be featured soon!