A family member once said: “there are a lot of yous (sic) and only one me.” That may not be the nicest and most selfless thing to say, but that’s something retirement plan sponsors should think when it comes to the needs of the retirement plan. Maybe Captain Kirk said it best in Star Trek III, when he contradicted the viewpoint of Captain Spock who gave his life to save the Enterprise at the end of Star Trek II by saying: ‘the needs of the one outweigh the needs of the many.” The needs of the retirement plan sponsor’s plan outweigh the needs of the retirement plan providers.
A retirement plan sponsor always needs what is best for the retirement plan and if their current plan provider can’t handle what they need, it’s time to wave goodbye. There are too many third party administrators (TPA) who don’t have the flexibility to administer plan provisions or different retirement plans that a plan sponsor needs. If what’s best for a plan sponsor that they have a defined benefit plan in addition to a 401(k) plan to maximize the retirement savings of their highly paid people and their current TPA can’t handle it, it’s best to find a TPA who can. Otherwise, the plan sponsor can’t maximize retirement savings and Uncle Sam gets more tax dollars.
I recently came across a retirement plan sponsor that has a plan with two adopting employers where there is some common ownership, but not enough to be a controlled group. By not being in a controlled group, these three companies have to bee separated for testing purposes. The incumbent TPA said they can’t handle this type of plan (the plan is now considered a multiple employer plan) and the plan sponsor would have to set up separate plans for the companies, which would unnecessarily drive up administration costs.
A plan sponsor has a fiduciary responsibility to the plan, not the plan sponsor. If the plan provider no longer fits, it’s time to find one that does, like a glove.