Retirement Plan TPA Internal Controls Part I

October 25, 2012 at 4:21 pm Leave a comment

Internal controls are important to me because they help reduce fraud and errors. Does your retirement plan TPA have proper internal controls?  Your TPA will be handling confidential employee information and financial data.  One of the controls that should be in place are human resource controls (Kimmel, P., Kieso, D., and Weygandt, J.  Financial Accounting: Tools for Business Decision Making, 6th ed.  (2011).  Danvers, MA:  John Wiley & Sons, Inc., pp. 344).  As a consumer, I feel it is imperative that you check these controls when choosing a TPA.

Does the TPA perform background checks to make sure employees do not have a history of theft?   With increased societal concern over identity theft, could you imagine the potential of an individual to take advantage of the employee census data you would be required to provide each year?  Social security numbers, names, and salaries could be transmitted to unauthorized parties.

Are employees hired and promoted on qualifications and merit?  Or does an employee receive a managerial position based on being married to a referer of business without any meaningful skills or qualifications?  Such an individual might encourage employees to have alcohol during the work day and other malfeasant behavior.  Or worse yet, an unqualified manager would likely reinforce the behavior of unqualified employees rather than working on improving their skills because she does not understand even the most basic pension concepts.  Would you want those people working on your plan?   It is important to confirm that department managers and administrators are Enrolled Retirement Plan Agents (ERPA) or Enrolled Actuaries (EA) and have applicable credentials.  For example, a QKA is not qualified to work on plans that are not 401(k)’s (ASPPA.  (2009). Qualified 401(k) Administrator QKA Credential Overview.  Retrieved from

I recommend doing your research and ensuring you have found the best.  You cannot assume that a TPA that skimps on the knowledge workers that will work on your plan will not skimp on human resources and other supporting positions.  You need to confirm that the appropriate controls are in place.  My experience is those who have no interest in qualifications will give you every song and dance to explain why you do not need solid controls.  They are also the ones who eventually will cost you thousands of dollars in fines and corrections later down the road.

I discuss more on determining TPA qualifications in my book, A Short Guide to Finding a High Value, Low Fee Third Party Administrator (TPA) for Your Retirement Plan, available at and My goal is to help plan sponsors make the best decision they can when selecting a  TPA.  I understand how difficult a decision this can be when you do not know what skills and credentials to look for.  I have created this book to ease the process and enable plan sponsors to make good choices through my insights from working in the industry.

Thanks for reading and have a wonderful day!   Please be sure to sign up for my blog and follow me on twitter.

I am not selling my own or any one else’s TPA services through this blog or my book.

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A Retirement Plan TPA Warning Sign Retirement Plan TPA Internal Controls Part II

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Christine Gurney

A pension professional who shares her thoughts and ideas about the pension world for industry members and anyone else interested.

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