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What is a TPA?

TPA is the acronym for Third Party Administrator.  A third party pension administrator is someone who performs all the busywork that the plan sponsor doesn’t want to do or can’t do because he (or she) simply doesn’t have the knowledge.  The TPA keeps the plan in compliance with IRS regulations, performs an annual trust accounting, generates certain documents that are required to be generated each year (SARs, participant certificates, 1099Rs), completes the form 5500 and schedules, etc.   A TPA performs his task timely so as to not incur any penalties or fines on behalf of the client. 

TPAs typically hook themselves up with strategic relationships…. business relationships with financial planners, attorneys, or accountants.  It is those professionals who determine that a client needs the services of a TPA to perform work on behalf of the soon to be mutual client.  If you are a CFP, CPA, attorney, EA, or any service professional and you have clients that may need the services of a TPA to handle the work associated with their retirement plan, please do not hesitate to contact PATA!!! 

Is a TPA a fiduciary?  NO.  Here is the first question and answer taken straight from the Code of Federal Regulations (CFR) …

 For the full text of the CFR quoted below, click on the link

29 CFR 2509.75-5 - Questions and answers relating to fiduciary responsibility 

    D-1 Q: Is an attorney, accountant, actuary or consultant who renders 

legal, accounting, actuarial or consulting services to an employee 

benefit plan (other than an investment adviser to the plan) a fiduciary 

to the plan solely by virtue of the rendering of such services, absent a 

showing that such consultant (a) exercises discretionary authority or 

discretionary control respecting the management of the plan, (b) 

exercises authority or control respecting management or disposition of 

the plan's assets, (c) renders investment advice for a fee, direct or 

indirect, with respect to the assets of the plan, or has any authority 

or responsibility to do so, or (d) has any discretionary authority or 

discretionary responsibility in the administration of the plan?

    A: No. However, while attorneys, accountants, actuaries and 

consultants performing their usual professional functions will 

ordinarily not be considered fiduciaries, if the factual situation in a 

particular case falls within one of the categories described in clauses 

(a) through (d) of this question, such persons would be considered to be 

fiduciaries within the meaning of section 3(21) of the Act. The Internal 

Revenue Service notes that such persons would also be considered to be 

fiduciaries within the meaning of section 4975(e)(3) of the Internal 

Revenue Code of 1954. 

And finally, one thing a TPA doesn’t do is work for nothing.  Typically, TPAs perform their task by the job rather than by the hour.  TPA fees are a 100% deductible business expense.  Some TPAs sell product (investments), PATA does not.  PATA does not receive compensation from the investments (commissions or basis point compensation)…   Certain situations do warrant being billed by the hour.