Review the 5 red flags below that may uncover the fact that your retirement plan is not being properly serviced or administered by your TPA. I encourage you to check in on your TPA to see if any of these red flags pop up. Now is the time to see if your plan is receiving the service and expertise it requires to stay compliant and run smoothly.
1. YOU are asked to identify HCE & Key employees – In order to test the plan, the Highly Compensated Employees (HCE’s) and Key employees must be correctly identified. You hired your TPA to identify the different categories of employees for testing purposes, so why are you being asked? If you incorrectly identify 1 employee, the compliance test and potentially all annual administration work will need to be re-done ~ no doubt at your cost, because it was YOUR mistake. Is this the service you wanted for your plan?
2. Your TPA doesn’t verify compensation – If you are a calendar year plan, is your TPA asking for copies of your W-2’s? This is the easiest way to verify your TPA is using the correct compensation when administering the plan. Also, did they probe to confirm you are providing compensation based on the plan document (excluding compensation prior to entry), or ask if you have a cafeteria plan (often these amounts are part of the plan document, and don’t appear anywhere on the W-2)? Not asking means not servicing!
3. Your plan’s balance sheet has one lump sum receivable – Your TPA reconciles the plan trust each year, and part of that process should include detailed financial statements. If your TPA can’t balance the plan, they may simply lump the difference into a receivable and “call it a day.” Plan receivables should be tied to specific contribution types and payrolls – with reports to back up the numbers. These amounts should be deposited in the following year & fall off of the balance sheet. Running receivables means your plan is not balancing each year (action is not being taken to keep the plan properly balanced year to year). Lumping receivables means there is more to the plan than meets the eye – ask your TPA what the receivable represents!
4. You call an 800# to speak to a plan representative and get a different voice every time - You are wasting time if you have to call an 800#, are re-routed a few times and end up with a different point of contact every time you have a question. Worse yet, if you have to spend time repeating who you are, and “YES! You really are a client”, and what your question/issue is that you would like to discuss, is this efficient use of your time? Hopefully your day job doesn’t keep you too busy so you have time for lengthy calls to your TPA.
5. Your TPA cannot provide you a signed copy of the plan’s most current Adoption Agreement that they drafted - So often I have asked a client to call their TPA and request a copy of their signed & dated plan document, but the only document produced is blank - not signed or dated. This is a legal document that is required to be adopted in a timely fashion and to be maintained for legislative changes. If you were under an IRS or DOL audit, would your TPA have compliant records? If not, would you want them representing you under audit?
If you recognize these red flags and are considering changing your TPA, please contact us at firstname.lastname@example.org.
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(Benefit Resources, Inc. is a Third Party Administrator in Sacramento, California that services plans all over the United States.)