Tip of the Week: The Role of the TPA

Using a third-party administrator assures the employer that procedures are in place to comply with the IRS regulations. Further, the TPA assists employers with the ability to comply with the universal availability requirements through educational programs for employees and periodic in-depth notices to employees about their right to participate in the plan.

 

The IRS has made it clear in audits of 403(b) plans that opportunities to participate in the plan should be frequent and diverse. In public webcasts, the IRS has mentioned the need to provide multiple methods throughout the year, including written in-depth notices (must be a “meaningful notice”), employee education programs and face-to-face assistance from financial advisors, emails and information on the school’s intranet. Every employer is unique and will know the best way to communicate with their employees. The IRS will want to verify on audit that the plan provides an effective opportunity to participate for all non-excludable employees. Notably, the IRS also has verbally stated that it is selecting and auditing employers with low participation rates in the plan (i.e., participation rates of 18-20%).

 

With the TPA options available, employers are encouraged to carefully screen available TPAs to ensure the TPA they select is experienced in providing administration services to K-12 non-ERISA 403(b) plans. Their level of administration services being offered is critical. As mentioned above, requesting a copy of the 403(b) plan’s administrative appendix will inform the employer what each party will be, or is, doing under the plan.

 

Editor’s Note: This is an occasional feature in the NTSA Advisor. This tip is taken from the 403(b) Plan Sponsor Guide, which is being made available to school districts nationally to assist them in understanding how to improve 403(b) plan participation and savings rates to help employees achieve a comfortable and timely retirement.
 

The 403(b) Plan Sponsor Guide is part of the content contained in the NTSA Certified Retirement Education Specialist (CRES) materials. The NTSA Certified Retirement Education Specialist (CRES) program and designation has been developed in order to equip advisors to be qualified and available to teach the NTSA educational program, which is designed to provide teachers with the basics of planning for retirement and improve their retirement readiness. More information about CRES is available here.