It became clear to me this year in Vegas at Excel 401(k): The Advisors’ Conference that some Advisors still think that TPAs are best suited for complicated plans and bundled works just fine for the non-complicated plans.
I know I am biased because I am a TPA….but hear me out.
I think Advisors need to look deeper into the actual operations if they really want to do right by their clients. My experience proves to me that the client census is the absolute most important thing in accurate administration/compliance work.
Bundled providers are built on efficiency, they are built on technology, their whole ethos when it come to administration is to keep costs low, do as much as they can as fast as they can with as little as they can.
My firm as a TPA takes census very, very seriously. We don’t just run & gun with whatever the client provides us. We scrub it, first visually by an expert, then with technology that continues the scrubbing from numerous angles. Bottom-line is that 40-50% of the census that we receive is flawed in some manner and we have to go back to the client to clean it up. We take the time to make sure it’s done right.
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Some of you will combat my flawed census theory with your shouts of TECHNOLOGY!! You will mention things like ‘full census submission’, ‘payroll feeds’ and ‘360 integration’ Oh, you poor mislead souls. You really think that’s how it works? If you think that no errors exist because of one of these modern day solutions is being used, your sorely mistaken. Plan Design Consultants has taken over bundled plans for decades and most of the time they are a wreck when they have relied upon the above mentioned tools.
You are resisting me, fighting back again and you say “But J.D, if all these plans were done wrong, wouldn’t the Govt be slamming down on them with audits, corrections and penalties?” Ummmm, yeah…when the Govt actually digs into these plans they do find mistakes. I remember a stat from the past where EBSA reported that 3 out of 4 plans audited had an ERISA violation of some kind. But because the Govt only has so many employees and there is only so much time in a day, the reality is that a lot of plans are living in ignorant bliss, they don’t know that their plan is being run wrong. The problems haven’t surfaced yet.
You work with an experienced TPA when you want things done correctly. Come a little closer…I want to tell you something and I am going to say it slow and deliberate because its super important. (pause…deep breath) Your clients (AKA the Plan Sponsors) are depending on YOU and they really, really want this stuff done properly. They don’t want the liability or the anxiety that goes along with their 401k plan possibly being done wrong. They don’t want to live in ignorant bliss and wait for the problems to surface.
They want to trust YOU (their Advisor) and have confidence that YOU are helping them make the right decisions when it comes to the 401k plan.