When you start a retirement plan for your company, there are a couple of options that you have. Will you use a bundled product, where the recordkeeping and administration are done by one organization, or will you un-bundle your plan, having different entities handle the different aspects of your particular retirement plan. Most people will instantly think that a bundled approach is easier, cheaper, and will mean only one point of contact for the plan rather than mutiple contacts. So let's look at it in a little more detail.
An un-bundled approach to the plan does not mean it will be more complicated. When working with the right partners, you life as the plan sponsor will not be burdened with more of a workload, and indeed in many circumstances you work on the plan may decrease when compared to using a bundled product. Why?
- Most TPA firms have a close relationship with multiple investment providers and platforms making the administration seamless
- A TPA firm can administer plans with investment holdings across multiple platforms or investment companies, whereas using a bundled product usually ties the plan to one product
- Many bundled products have limited plan design options, which could potentially limit the benefits the onwers or key individuals in a company may receive under the plan. A TPA can tailor the plan to fit your needs and help you meet the goals while keeping the plan in compliance and satisfying the rules and regulations
Cost is often a consideration when looking into setting up, or transfering a retirement plan from one provider to another. One of the great lines we hear as a TPA when meeting with a potential client is, "Your services look great, but XYZ Investments can do the administration for free if we move the plan assets to them." So let me ask you, as a business owner: When was the last time YOU gave away services for free?
- The reason many investment companies can offer 'free' administration is that by using their bundled product, they are making a considerable amount of money off of the plan assets
- Their 'free' services generally will be limited to simple plan designs
- Many times these services will NOT include functions such as employee educational meetings, completion and filing of the Form 5500 series, assistance in completion of plan audits
And finally, the issue of having multiple contacts can be a sticking point for some plan sponsors. But again, there are a number of advantages in having the plan set up in that manner:
- Your TPA often will have one point of contact that is assigned to your plan, so that whenever you call with questions you are always getting the same person. This not only helps build a long-term relationship between the TPA and the plan sponsor, but makes things much easier for the sponsor knowing that one person is already familiar with the history of the plan
- TPAs, in general, specialize in retirement plan design and administration, and do no focus on 'other' aspects, and therefore can provide you with the best guidance in plan design, ongoing administration, and changes in your retirement plan needs
- TPAs will usually assist in employee education, and work closely with your investment advisor and the custodian of the plan assets to be sure employees receive the latest and most accurate information
Now I could go on for another 2o pages about the advantages of using a company such as ours to administer your retirement plan. But instead I just wanted to touch upon some of the major points that come up in meeting with potential clients. So before you jump into a new retirement plan, stop and look at the options before you. And ask around for service providers in your area to get additional input and quotes...
