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Three’s Company: The Cost of a 401(k) (Part One)



After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!


January 19, 2012 at 8:06 pm
Retirement News


Assuming we survive the coming Zombie Apocalypse, we’ll all eventually retire. That’s the hope, anyway.

We’ll work hard when we’re younger and it will all pay off when we’re old enough to retire. We’ll spend more time with loved ones. We’ll realize dreams that have accumulated on our bucket lists.

In order to get there, we have traditionally relied on the metaphor of the “three-legged stool.” That stool is comprised of Social Security, pensions, and our own personal savings. Unfortunately, pensions have all but become extinct over the years. It’s expected that Social Security could do the same before Gen Xers retire.
This means we’re only left with our personal savings including, but not limited to, your 401(k).

Over the next three weeks, I’ll be covering cost of creating and maintaining a 401(k) plan. Costs are such a driving force with any product. The more complicated the industry, the more complex the upkeep.

Your 401(k) costs can also be split into three parts:
• Administration
• Record Keeping
• Investments

Let’s get started with the first on the list: Administration. It puts the “A” in “TPA”, or Third Party Administrator. For every 401(k) plan, this is the very important legal component. Administration refers to the responsibilities of a third party to manage the intricacies of the federal regulations that govern the actual 401(k) code of retirement planning. In short, this is where the rules are made, held, and enforced.

“Administrator” is defined as “a person who manages.” Loosely, this may seem like the individual who manages the 401(k) on the company level. However, in this case, this term belongs to a group of folks who make sure your 401(k) is compliant. Those responsibilities include, but aren’t limited to, making required amendments to the documents, administering the required year-end testing, and reporting the Form 5500 (think 401(k) tax forms) to the IRS.

In many cases, these businesses specialize in the administration only and can create some pretty specialized plans. Not only do these folks know the law inside and out, but they can also work very hard to translate for you what’s best for your business. If you’d like a dedicated analyst and special rules just for your company, this is where you’ll find it. There’s probably one in your local area.

However, TPAs don’t do everything. What good is a unique plan design if there’s nowhere to put it? Next time, we’ll talk about the bean counting of your 401(k), Record Keeping.

Contact me via LinkedIn, Twitter (@coolest401kguy), or here!