As a retirement plan sponsor, you are a valuable member of a team that includes your recordkeeper, third-party administrator (TPA), financial wellness provider, and retirement plan advisor. Each member must uphold their roles and responsibilities to maintain a stable and well-standing retirement plan. Much like a table, if one leg fails to support it, you may find yourself with a mess on your hands.
Your retirement plan service providers can help support critical functions such as recordkeeping, plan design, compliance, administration, participant education, investment selection, management, and monitoring — all while keeping costs reasonable.
To be sure, partnering with a team of supportive, knowledgeable providers has the potential to contribute to the success of your 401(k) plan and make your life easier.
Many plan sponsors opt to outsource to a small but mighty team of partners for support with various duties, from plan governance and administration to investment management and financial wellness. Depending on the provider, some responsibilities may overlap. For instance, some recordkeepers have responded to the financial uncertainty of the past few years by offering emergency savings products that employers can provide as an employee benefit. In the past, these products were primarily in the hands of financial wellness providers.
Generally, plan sponsors can get the best “bang for their buck” by utilizing providers according to their strengths. For example, a TPA likely has expertise when it comes to compliance testing, while a recordkeeper may be more knowledgeable about integrating payroll systems and maintaining a best-in-class website experience for your employees.
Partnering with external service providers can deliver several benefits for plan sponsors and participants, including improvements in the following:
Keep in mind that outsourcing doesn’t absolve you or your retirement plan committee of fiduciary duties. Ultimately, you are responsible for ensuring that plan providers fulfill their responsibilities and deliver a level of value and service worthy of their fees. That said, these partnerships can help lighten your load and allow you to focus on your core competencies while benefiting from solid partnerships with quality providers.
In short, there is no cut-and-dried answer. Providers will have varying services and specialties in the areas of 401(k) plan management. In the case of redundancies, you may choose to assign specific responsibilities to the vendors you determine are the most qualified. Fortunately, LoVasco will quarterback this process, ensuring the use of providers is optimized.
Generally speaking, here are some of the 401(k) plan responsibilities your recordkeeper, third-party administrator, financial wellness provider, and retirement plan advisor partners may take on in whole or in part:
No two plans are alike, so your best bet may be to determine what works for your business and employees and make sure your provider partners deliver on those expectations.
At LoVasco, we help our clients evaluate their current service providers, the tools and technology they offer, and the value they bring. If you have questions about how to optimize your plan provider partner relationships, we can help. Contact us for additional guidance and to learn more about partnership opportunities.
This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.
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