EXPOSED…Exactly What A TPA Does And What A Payroll Provider Shouldn’t Do!

By Peter Macaluso, Vice President, FMi

It’s amazing to me in this new digital world, where data is so readily available, that there’s also such a wealth of misinformation on subjects that can significantly affect our lives. In my many years with FMi, I’ve found this to be all-too true in the world of retirement planning. So you can imagine how enjoyable it was for me to read an article devoted to this subject.

In Solving The Mystery Of What A TPA Does, Ary Rosenbaum, Esq. does an excellent job of answering this question. For those as yet unfamiliar with his writings, Rosenbaum correctly states that a TPA — Third-Party Administration firm — “serves as the backbone of the qualified {retirement} plan industry”. He goes on to say that “plan sponsors need to hire quality TPAs and review their work to ensure competence…”

At FMi, I’ve seen first-hand the consequences experienced by those who didn’t follow this advice. Fortunately in these cases, we were able to remedy the situation at minimal expense, and provide the professional expertise to develop the right plan for their businesses.

As Mr. Rosenbaum also points out, “no TPA is the answer for everyone…whichever TPA you have, make sure it’s the right fit for competency and cost.” It’s important to carefully consider both factors to ensure complete satisfaction with the retirement plan you choose. For example, in many large firms, retirement planning is a small part of their business. They can offer ‘as-is’ plans at what seems to be a great low price, but that’s because you’re actually getting very little service. And you could end up paying more for their inattentiveness down the road.

In contrast to ‘mega’ firms like US investment, insurance, or payroll companies where the focus isn’t solely on retirement planning, at FMi we specialize in finding the perfect plan for every sponsor. If cost is the major issue, we can make it inexpensive without sacrificing your plan’s proper administration. While the price of customizing retirement benefits is slightly higher, we keep the cost competitive while carefully tailoring a plan that best suits your needs. So the plan works best for you and all its participants. That’s why a well-qualified TPA is so critical to your plan’s success. And why you should take a few minutes to read Mr. Rosenbaum’s article in full by clicking here: Solving the Mystery of what a TPA does

“There is more to 401(k) plan administration than payroll deductions.” This is a quote from another piece written by Ary Rosenbaum, Esq. that again echoes my own beliefs that most payroll providers don’t make the best retirement plan administrators. As he so deftly points out, except for the fact that these providers deduct the salary deferral contributions from employees’ paychecks, “there is no connection between payroll services and retirement plan administration”, no matter how emphatically they tell you otherwise.

Most large payroll providers have a small department that offers existing clients a basically ‘one-size-fits-all’ plan. After all, it’s not their company’s major interest; more like an after-thought or add-on revenue source. Often, their clients think they’re getting a retirement plan for “free” with their payroll services, but that isn’t the case at all. In fact, they’re not really getting any “planning” at all, since it’s given without ever consulting anyone about their specific company’s needs. How can they have your retirement ‘answer’ if they’ve never asked any of the right questions?

A retirement specialist like FMi delivers the complete spectrum of plans and options, and has no ancillary business interests. Our focus is exclusively on retirement planning. We consult with our clients…design a plan customized to their specific needs…then oversee and administer the program. So that our clients and their plan participants receive both the cost-effectiveness and retirement benefits they need.

For a full explanation of why it’s best not to employ your payroll provider for retirement services, take a look at all Mr. Rosenbaum had to say on the subject: Solving the Mystery of what a TPA does

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