Resources

CPA Guide: What Exactly Do TPAs Do?

• Speaking of acronyms — what does TPA actually stand for? “TPA” means “Third Party Administrator”

• What is a TPA? Broadly, a TPA is an individual or company who specializes in administrative operations for plan sponsors, including overseeing compliance with the law and agency regulations (primarily the IRS and DOL).

• What do TPAs do? TPAs wear many hats and offer services including those related to:

• Compliance consulting. TPAs can help navigate both what the law says and how a given plan works in practice. A TPA looks at plan operation and administration against the plan document language to verify they correspond and that all falls within the complex legal and regulatory framework surrounding benefit plans.
   
• Preparing plan documents. After consulting and obtaining the needs of the plan sponsor—including their tax goals as discussed with you—a TPA can generate a prototype plan document with supporting documentation, while also ensuring that any amendments are timely adopted.
   
• Tracking and determining eligibility. Eligibility can hinge on several factors like age or classification. With recent SECURE 2.0 legislation, for example, any eligibility exclusion based on service was eliminated with longterm part-time employee legal and regulatory changes. TPAs can help design a plan to meet plan sponsor needs and keep it updated for changes in the law.
   
• Tracking distributions. RMDs and hardship distributions have had several changes over the years and other distributions, mostly optional, have been offered through SECURE 2.0. A TPA can describe those features and help the plan sponsor assess whether adoption would meet the needs of the sponsor and employees.
   
• Tracking loans. Some plans don’t offer loans, while others may offer them but with conditions. Conditions—like limits on how many outstanding loans a participant may have, or which benefit accounts are accessible when taking a loan—must be monitored and a TPA can do that for you. Additionally, there are notices and forms that must be provided to participants when they take a loan and the TPA can generally generate the amortization schedule and other forms.
   
• Generating notices. Most plans have annual notices— like safe harbor notices, automatic enrollment and contribution escalation, fee disclosures, SMMs detailing plan amendments, COBRA notices, etc.—that must be distributed and documented.
   
• Preparing Form 5500 for plan sponsor’s signature. Every ERISA plan has mandatory tax reporting that must be done annually. Depending on the number of participants, an independent audit (by CPAs like you!) and other forms may be required to be filed alongside the 5500. A TPA can generate those forms.
   
• Managing vendors. When searching for a recordkeeper, payroll provider, investment advisor, or other vendors, a TPA can help you collect RFPs and review the pros and cons from each submission. ERISA requires plan fiduciaries regularly perform RFPs to ensure they are getting the best, most reasonably priced service for the plan’s assets.
   
• Assisting with business and regulatory compliance during mergers, acquisitions, or plan termination. There are plenty of moving parts during transactions and a TPA can be a great asset, including providing general advice about how such corporate transactions may impact plan compliance matters.

Hannah Munn, Partner, Poyner Spruill
Hannah’s practice is focused in the areas of Employee Benefits and Executive Compensation. She works with business owners and HR executives to understand and manage employee benefits and executive compensation arrangements. She routinely represents clients before the Internal Revenue Service, Department of Labor, and Pension Benefit Guarantee Corporation and has extensive experience in virtually all aspects of employee benefits.