--- title: The Pros And Cons Of Hiring A 401k TPA (Third Party Administrator) description: Are you wondering what the pros and cons of hiring a 401k third-party administrator (TPA) are? We've got you covered in this blog post. image: https://blog.cmp.cpa/hubfs/The-Pros-And-Cons-Of-Hiring-A-Third-Party-Administrator-Outside-Blog.jpg --- - [Contact Us](https://cmp.cpa/contact-us/) - [Bill Pay](https://cmp.cpa/my-account/) - [File Drop-Off](https://app2.gettruss.io/firm_drop_offs/new?auth_token=MTQyNyZ6OW1HeHh4NWhRbXNIRDF6RmU3OVZXRGJRUkV2aU5ZSGN0OXprNUtH&firm_user_id=3261) - [Client Portal](https://app2.gettruss.io/client_portals/sign_in?client_portal_name=CMP-CPA) [![CMP](https://blog.cmp.cpa/hubfs/Cookmartin-Dec2015/CMP-Logo.png "Cook Martin Poulson, P.C.")](https://cmp.cpa/) - [Home](https://cmp.cpa/) - [About](https://cmp.cpa/company/) - [Meet the Team](https://cmp.cpa/company/meet-the-team/) - [Community](https://cmp.cpa/company/community/) - [CMP Celebrates 40-Years In Business](https://cmp.cpa/company/news/) - [Careers](https://cmp.cpa/company/careers/) - [Reviews & Testimonials](https://cmp.cpa/reviews/) - [Services](https://cmp.cpa/services/) - [Tax Preparation](https://cmp.cpa/services/income-tax-services/) - [Financial Audits & Reviews](https://cmp.cpa/services/financial-statements-audits-and-reviews/) - [Business Valuation](https://cmp.cpa/services/business-valuations/) - [Estate and Succession Planning](https://cmp.cpa/services/estate-succession-planning/) - [ERISA / 401K Audits](https://cmp.cpa/services/erisa-audits/) - [Crypto Tax Accountant](https://cmp.cpa/services/crypto-tax/) - [Federal R&D Tax Credit](https://cmp.cpa/services/rd-tax-credit-services/) - [Utah R&D Tax Credit](https://cmp.cpa/services/utah-rd-tax-credit-services/) - [Bookkeeping and Payroll](https://cmp.cpa/services/bookkeeping-and-payroll-services/) - [Accounting Software Solutions & Consulting](https://cmp.cpa/services/accounting-software-solutions/) - [Retirement Plan Services and TPA](https://cmp.cpa/services/retirement-plan-tpa-services/) - [Cost Segragation Studies](https://cmp.cpa/services/cost-segregation/) - [Outsourced CFO](https://cmp.cpa/services/cfo-outsourced-solutions/) - [Industries](https://cmp.cpa/industries/) - [Farm and Ranch](https://cmp.cpa/industries/farm-ranch-accountant-service/) - [Real Estate and Construction](https://cmp.cpa/industries/real-estate-construction/) - [Retail and Wholesale](https://cmp.cpa/industries/wholesale-and-retail-accounting-services/) - [Nonprofit](https://cmp.cpa/industries/non-profits/) - [Manufacturing](https://cmp.cpa/industries/manufacturing/) - [Healthcare](https://cmp.cpa/industries/healthcare/) - [Technology](https://cmp.cpa/industries/software-technology/) - [Internet Marketing/YouTube](https://cmp.cpa/industries/internet-marketing-youtube/) - [Resources](https://cmp.cpa/resources/) - [Videos](https://cmp.cpa/videos/) - [Tools](https://cmp.cpa/resources/#tools) - [Important Documents](https://cmp.cpa/resources/#import-doc) - [Important Links](https://cmp.cpa/resources/#import-link) - [FAQ](https://cmp.cpa/resources/faqs/) - [Problems We Solve](https://cmp.cpa/problems-we-solve/) - [Blog](https://blog.cmp.cpa/)   Wasatch Front  [801-467-4450](tel:8014674450) |  Cache Valley [435-750-5566](tel:4357505566)[tel:8017428119](tel:8017428119) | Southern Utah  [435-269-4540](tel:4352694540) ![Salt-Lake-City-Utah.jpg](https://blog.cmp.cpa/hs-fs/hubfs/Cookmartin-Dec2015/Salt-Lake-City-Utah.jpg?width=1106&name=Salt-Lake-City-Utah.jpg "Salt-Lake-City-Utah.jpg") # The Pros And Cons Of Hiring A 401k TPA (Third Party Administrator) September 26, 2016 By [Richard K. Poulson](https://blog.cmp.cpa/author/richard-k-poulson) Most businesses provide benefits packages to their employees, but deciding how to manage them can be tricky. Although some businesses do manage these benefits themselves, they’re often complicated and time-consuming. Ultimately, contracting a [**third-party administrator**](https://cmp.cpa/services/retirement-plan-tpa-services/) with specialized knowledge about health care and retirement or savings plans might be a better option. ![The Pros And Cons Of Hiring A Third Party Administrator - Inside Blog](https://blog.cmp.cpa/hs-fs/hubfs/The%20Pros%20And%20Cons%20Of%20Hiring%20A%20Third%20Party%20Administrator%20-%20Inside%20Blog.jpg?width=750&name=The%20Pros%20And%20Cons%20Of%20Hiring%20A%20Third%20Party%20Administrator%20-%20Inside%20Blog.jpg) ## What Is A Third-Party Administrator? A third-party[ administrator (TPA)](https://blog.cmp.cpa/what-is-a-401k-tpa/) is a company that manages certain aspects of a business’ employee benefits package. Many companies outsource this function to save time and money.   TPAs are usually independent businesses, but sometimes they are also associated with certain insurance carriers. Outsourcing this function is quite popular among small business owners as it frees them from the worry of insurance and benefits packages. Third-party administrators are also highly skilled and knowledgeable in their respective fields and can provide great value to a business. What exactly do TPA's manage? - **Commercial Liability** - **Health Care** - **401(k) Retirement Plans** - **Self Insurance** If you haven’t outsourced this before, it can be a little scary to make such a long-term decision that concerns money. How do you know the service is worth the price? Although many offer good advice, it’s hard to know if they will really deliver. ### So what is the advantage of hiring a third-party administrator to manage your benefits plan? ## The Pros of hiring a TPA Hiring a TPA to manage your employee benefits program has many advantages. - TPAs have vast knowledge of money management. This is especially true when it comes to [taxes](https://cmp.cpa/services/income-tax-services/) and investments. - A certified financial planner usually better understands savings and 401(k) retirement planning. They can help small business owners analyze and strategize their overall retirement plans. - TPAs can also help individual employees figure out their retirement goals at the beginning of the planning process, saving you a lot of time, planning, and effort. Managing the portfolios of employees can be time-consuming and at times it can also get complicated. By allowing someone to handle the entire process, you can concentrate on your business. When looking at all the work that goes into managing a benefits package, you can see how hiring a TPA might be highly cost-effective. As your plan grows, understanding your compliance responsibilities becomes just as important as outsourcing administration. Our latest post outlines [when a 401(k) audit is required](https://blog.cmp.cpa/401k-plan-audit), how the ERISA thresholds apply, and what employers should review each year to stay ahead of audit requirements. A clear understanding now can help prevent last-minute issues and compliance surprises. ## The Cons of hiring a TPA One thing to keep in mind is that a TPA may not always have your company’s best interests in mind. They are their own entity and have their own goals and philosophy. At times you may have conflicting philosophies as to how something should be done. One way to negate this situation is to hire a fiduciary TPA. This type of TPA is required by law to only make recommendations that are beneficial to their clients. As of April 2017, a new [Department of Labor](http://money.usnews.com/money/blogs/planning-to-retire/articles/2016-04-08/the-new-retirement-account-fiduciary-standard) rule considers TPAs that give advice to 401(k) and IRA participants to be fiduciaries. There are many types of TPAs, so it’s important to research your options before choosing one. Also remember that different types of TPAs can create greater flexibility – if you are unhappy with your first choice, you can always move to another. Despite the potential conflict of interest, TPA benefits usually outweigh the cons. If you have many employees, managing their benefits in-house can create unnecessary burdens and confusion. TPAs exist to help businesses manage this aspect and make sure employee benefits packages are implemented smoothly while also providing helpful information to each employee.   --- ## Conclusion At the end of the day, it’s a small price to avoid all the hassle that goes into managing benefits packages for yourself and your employees. If you have any questions or need further information, please get in touch with us by clicking the link below. 401(k) plan administration Third-party administration, handled by CPAs Annual nondiscrimination and compliance testing, Form 5500 filings and plan document updates, handled by CMP’s retirement plan team of CPAs and ASPPA members. [Talk to Our Retirement Plan Team](https://info.cmp.cpa/tpa-services?utm_source=blog&utm_medium=inline_cta&utm_campaign=hiring-a-third-party-administrator&utm_content=tpa-services-end)   *This content is for educational purposes only and may not apply to your specific tax situation. Tax laws are complex, subject to change, and depend on individual circumstances. Consult a qualified tax advisor before relying on this information.* [![Richard K. Poulson](https://blog.cmp.cpa/hs-fs/hubfs/Blog_Author/richard-poulson.jpg?width=160&height=190&name=richard-poulson.jpg)](https://cmp.cpa/team/richard-k-poulson/) About Richard K. Poulson Rich is the kind of man everyone likes to have around. He is totally committed to whatever he is doing, whether it is working on a client’s estate plan, business valuations, or vacationing with his family. His goal is to help you add value to your business. You can feel comfortable with the outcome of any project if Rich is involved. You know he will be honest, give the project the time it deserves, and you’ll always get the best he has to offer. 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Trusted By: Trusted By: - ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) - ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) - ![](https://cmp.cpa/wp-content/uploads/Renegade.png) - ![](https://cmp.cpa/wp-content/uploads/cvm.png) - ![](https://cmp.cpa/wp-content/uploads/evolution.png) - ![](https://cmp.cpa/wp-content/uploads/Baicor.png) - ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) - ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) - ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) - ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) ![](https://cmp.cpa/wp-content/uploads/Renegade.png) ![](https://cmp.cpa/wp-content/uploads/cvm.png) ![](https://cmp.cpa/wp-content/uploads/evolution.png) ![](https://cmp.cpa/wp-content/uploads/Baicor.png) ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) ![](https://cmp.cpa/wp-content/uploads/Renegade.png) ![](https://cmp.cpa/wp-content/uploads/cvm.png) ![](https://cmp.cpa/wp-content/uploads/evolution.png) ![](https://cmp.cpa/wp-content/uploads/Baicor.png) ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ```json { "@context" : "https://schema.org", "@id" : "https://blog.cmp.cpa/hiring-a-third-party-administrator#blogposting", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Richard K. Poulson", "url" : "https://blog.cmp.cpa/author/richard-k-poulson" }, "dateModified" : "2016-09-26", "datePublished" : "2016-09-26", "description" : "Many businesses offer employee benefits but find administration complex and time-consuming. This article explains what a third-party administrator (TPA) is, why companies hire TPAs to help manage benefit plans, and the pros and cons to consider before outsourcing plan administration.", "hasPart" : [ { "@id" : "https://blog.cmp.cpa/hiring-a-third-party-administrator#faq" } ], "headline" : "The Pros And Cons Of Hiring A 401k TPA (Third Party Administrator)", "image" : { "@type" : "ImageObject", "height" : 1000, "url" : "https://blog.cmp.cpa/hs-fs/hubfs/The%20Pros%20And%20Cons%20Of%20Hiring%20A%20Third%20Party%20Administrator%20-%20Inside%20Blog.jpg?width=2000&height=1000&name=The+Pros+And+Cons+Of+Hiring+A+Third+Party+Administrator+-+Inside+Blog.jpg", "width" : 2000 }, "inLanguage" : "en", "mainEntityOfPage" : { "@id" : "https://blog.cmp.cpa/hiring-a-third-party-administrator", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "height" : 86, "url" : "https://cmp.cpa/wp-content/uploads/CMP-Logo.png", "width" : 406 }, "name" : "CMP" } } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.cmp.cpa/hiring-a-third-party-administrator#faq", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A third-party administrator (TPA) is a company that manages certain administrative aspects of an employee benefits package—such as health or retirement plan administration—so the business doesn’t have to manage those processes in-house." }, "name" : "What Is A Third-Party Administrator?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Hiring a TPA can save time and reduce administrative burden, while providing specialized benefits-plan knowledge and support for the business and its employees. A potential downside is that TPAs are independent and may not always share the same priorities as the employer, so vetting and oversight matter." }, "name" : "So what is the advantage of hiring a third-party administrator to manage your benefits plan?" } ] } ```