Tips for Choosing the Right Third-Party Administrator for Your Small Business 401(k)

As a small business owner, you may be invested in the future of your employees both while in your employment and after retirement. For that reason, you may choose to incorporate a 401(k) qualified retirement plan into your business. 

If you are unfamiliar with the process, you may find it very daunting. Which 401(k) qualified retirement plan will be best suited to you, your company, and your employees? What kind of paperwork is involved, and who will take responsibility for it? What about tax season? Will a 401(k) qualified retirement plan require additional paperwork during the tax season? Do you need to educate and train your employees on the ins and outs of a new policy?

There are a plethora of questions that race through your mind. You may consider appointing yourself as the plan administrator. But you do have another option: appointing an administrator for small business 401k plan administration. 

A third-party entity, also known as a third-party administrator (TPA), is tasked with performing the duties that are assigned to the plan administrator. An important point to keep in mind is that by discharging the responsibility to a third-party entity, the owner in no way relieves him/herself of the liability.

A third-party administrator (TPA) has specific duties, which include:

  • Providing eligible employees with assistance, training, information, and plan details pertaining to the employee.
  • Determining at which point each employee becomes eligible for the plan.
  • Calculating and distributing employee benefits for each employee.
  • Determining employee and employer plan contribution amounts.
  • Filing and preparing tax forms for employees and the company.

Essentially, the goal for you, the small business owner, is to ensure that you select the appropriate third-party administrator (TPA) that will meet the needs of your company and design the ideal plan that suits your company and your employees. 

What to look for in a 401k administrator

Excellent communication skills

This individual will be planning your future retirement plan, that of your employees, and your investment plan for the company. A crucial skill that this individual needs to possess is outstanding communication.

You ultimately want someone who is very hands-on in terms of communicating information to you and your employees. But this extends far beyond the initial phase where the plan is customized to meet your business needs — it extends to the years that follow. You will be walking a distance, so to speak, with this person. They will assume responsibility for the plan and its administration, and the 401(k) administrator should know how to communicate throughout the process and the years to follow.


Product knowledge is crucial. The administrator needs to understand how a plan is formulated and customized.

In addition, the administrator must be familiar with how to keep the retirement plan compliant and be sure that it meets all the requirements as set out by the IRS and Department of Labor (DOL). 


Ideally, focus on a company that specializes in plan administration only. There are a lot of things that go into maintaining a 401(k) plan and keeping it compliant. Working with a company that will focus exclusively on matters pertaining to your plan will ensure that your company receives the appropriate care and attention. 

Speak to a representative at Fiduciary Advisors, LTD. on (602) 864-1012 today regarding the design and implementation of your company’s 401k plan.