To offer a 401h for your employees, you’ll need a 401h administrator or third-party administrator to handle it for you. Not all administrators offer the same services, which means you may come up short in what you were looking for if you don’t do your research.
Here’s what you must know before you choose a plan and an administrator to run it.
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What are 401h Administrators?
A 401h administrator runs your 401h plan for you so you can focus on running your business. Each administrator offers different services, but there are the most common tasks they offer:
- Creating a plan to reach your financial goals
- Working together with your CPA to consider all tax consequences and financial aspects of the plan
- Drafting necessary documentation
- Ensure compliance
- File necessary 5500 forms
How do 401h Administrators Help Employees?
While third-party administrators work for employers, they can offer several benefits to employees too including:
- Discussing the 401h plan and how it can help them
- Consulting continuously about retirement goals and how recent actions will help or hinder them
- Reassurance that the plan operates as a fiduciary
- Peace of mind that the plan is regularly reviewed ensuring all employees’ best interests
- Help working an employee’s 401h plan into their individual financial goals
How to Choose the Right 401h Administrator
Choosing a 401h administrator is just as important as choosing the right plan. Your administrator should have the following qualities.
You could have the best 401h plan available today, but if it doesn’t align with your goals, it’s useless. You want an administrator that listens to you and your employees and drafts a plan with the most benefits for your situation.
Choose a TPA that listens to your needs and that you feel comfortable talking to about all aspects of the plan. If there’s a communication barrier, you may not achieve your financial goals.
Compliance is the key to a successful 401h plan. A TPA must be on the ball with all requirements, administrative needs, and communication. Without proper compliance, there could be missed deadlines, fees, and penalties you otherwise could have avoided with the right administrator.
A good 401h plan meets your company’s goals. What happens when your goals change? Your administrator should be able to handle all necessary changes and be willing to assess your situation at any time.
At the very least, they should put together an annual planning meeting to look at how the plan suits your company so far and how it will help you achieve your short and long-term goals.
Your TPA should deliver what they promise. Even after you choose a TPA, evaluate how well they live up to what they said they would do. Picking the right TPA takes time and due diligence, but it’s well worth the effort.
The right TPA can provide guidance, support, and help you create the most effective plan for your company and your employees.