401(k) and Third Party Administrators

[Guest DAraniti]

I am looking to establish the criteria for selecting a 401(k) third party administrator in the small case market. For example, how are TPAs selected by Nationwide and Manulife (i.e. years of service, quality of service, etc.)? How are TPAs paid (commissions and/or market allowances)? How many small 401(k) plans are bundled vs. unbundled? What is the sales potential for unbundled plans? What is the trend?

Any info on TPAs would be much appreciated.

[Guest RS Vatalaro]

Ususally the investment provider is not the entity selecting/recommending the TPA. A broker or agent is normally involved. For example, if you choose Manulife, you would probably want to go through a local agent, licensed to sell the Manulife product. The agent conducts enrollment meetings on behalf of your employees, and can assist with selecting a reasonable menu of investment options based on your goals for the plan. The agent receives a commission on the assets for this service. Some investment providers will not work directly with you, and require you to start with an agent or broker.

Brokers and agents frequently have TPA's they recommend, as you suggest, based on quality of work and service. Some TPA firms are bundled, and the agent/broker and compliance provider (testing, 5500, etc) are under one roof.

Other TPA firms are fee-for-service only and have no broker affiliations. Some investment providers have their own in-house TPA servicer's. Manulife doesn't happen to be one of them.

Many TPA firms charge a minimum annual fee and charge by the participant in determining fees. Others charge by the hour. You may find in the very small plan market, that the investment house "in-house" TPA's aren't willing to work with a small case (not cost efficient) and a TPA firm charging a minimum annual fee will result in charges too high for the size of the plan. A TPA firm charging by the hour might work best for a very small plan.

Consider starting with a broker that you know and trust and get his/her recommendation on a TPA, and then do some price shopping. I'd be happy to give you add'l info if you have questions, my e mail is rvatalaro@earthlink.net.

Good luck.

[Guest Ernie Guerriero]

Where can I locate information on average TPA fees in the Northeast? Thanks.