One of the most persistent myths in the 401(k) universe is the idea that the third-party administrator (TPA) is the plan administrator. If I had a dollar for every time a plan sponsor insisted this was true, I could probably buy that Dallas Cowboys stadium Jerry Jones keeps pretending is a football team. But here’s the reality: unless your plan document specifically names your TPA as the plan administrator—and almost none do—that job belongs to you, the plan sponsor.
This comes as a shock to most HR and finance teams. They’re convinced the TPA handles everything. And to be fair, TPAs do handle a lot: compliance testing, Form 5500s, distributions, loans, payroll files, and more. But the Department of Labor didn’t write ERISA to make your life easy. They wrote it to make someone accountable. And that someone is the named fiduciary and plan administrator—which is usually the employer.
Being the plan administrator means you’re responsible for the accuracy of everything the TPA produces. If payroll sends over a file with 12 employees missing and the TPA processes it exactly as received, guess who the DOL is looking at? Not the TPA. You. If the TPA uploads the wrong amendment and you sign it without reading it, guess whose problem it becomes? Yours again.
This isn’t to say TPAs aren’t valuable—they are. A good TPA is the difference between operational compliance and a multi-year correction project that feels like Shawshank without the happy ending. But a TPA is a partner, not a shield.
The easiest way to avoid trouble is simple: know your role. Review what your TPA sends. Understand your plan document. Ask questions before signing anything. Hold annual meetings and document decisions. And for the love of ERISA, don’t assume “the TPA handles it” is a defense that will survive even 10 seconds with an auditor.
At the end of the day, it’s your plan, your fiduciary duty, and your name on the line. The TPA can guide you, but they can’t save you from responsibilities you didn’t know you had. So embrace your role—or at least acknowledge it—because pretending otherwise won’t save you when the correction costs start piling up.
