what are the integral TPA functions - or is it toally undefined?

[Guest Happy Actuary]

In defining the services that a TPA provides for a 401k plan, do you consider the following to be "core" services?

a. Calculation of ER contribution for the year (ex: 3% safe harbor)

b. Reconciliation of contributions (i.e., the employer reported that John Doe deferred $ 100 in 2008; can we confirm that it actually went in?)

Obviously, the really core stuff seems to be 5500 forms and compliance testing. However, as our industry evolves, it seems that "some do and some don't" do the above things. Clearly those who don't can charge less.

Can you call yourself a TPA if you don't do these services? Or is it really undefined? I'd be interested in hearing your views!

[MSN]

Each TPA should explicitly state what services they provide in their service agreement. There are obviously standard services like 5500 preparation and compliance testing that all TPAs do, but even with this there are differences between providers. Some may reconcile census data to payroll records and deposit records where some will take the data at face value. One could serve in a fiduciary role related to testing whereas others would not. I don't think you can generically say all TPAs do this set of things, because even within the "core" services, there are differentiators between providers.

My $0.02.

[BG5150]

Other functions can include: drafting loan agreements, benefit determinations (70.5, vesting), producing 1099's, plan document work (restatements, IDP's, amendments), plan design studies.

[K2retire]

One TPA firm where I worked did everything mentioned in previous posts. Where I work now, we do only testing, 5500 preparation, answer questions from employers and participants, provide quarterly statements and document work. The client is responsible for calculating their own contributions, eligibility and vesting. The fees charged by each firm reflected the difference in services provided.

[Guest Happy Actuary]

I guess I just (ignorantly ) assumed that the rest of the world is just like me and that all TPA's did all the stuff we do. So it really is a question of carefully defining these words (like TPA and administration). Hence the need to communicate it with the client well. Plus maybe selling opportunities if we can differentiate ourselves good against (perhaps bundled) competitors.

Thanks for your insights.

[K2retire]

Absolutely. We frequently hear from clients who mistakenly assumed that we would provide all the same services as their prior TPA for less than 20% of the cost. Although we provide a service agreement that clearly spells out what we will or will not do, it is rarely read by clients.