Glossary
Third-Party Administrator
A third-party administrator (TPA) is a firm hired to handle a retirement plan's technical compliance work — plan documents, nondiscrimination testing, government filings such as Form 5500, and distribution paperwork.
The TPA is the compliance engineer behind the scenes, distinct from the recordkeeper (who tracks accounts) and the adviser (who handles investments) — though "bundled" providers combine the roles. TPAs also design plans: choosing safe harbor formulas, profit-sharing allocations, and pairing 401(k)s with cash balance plans.
Why it matters in practice
For small businesses, plan design is where a good TPA earns its fee — the difference between a generic plan and one engineered so owners can contribute the maximum legally, at the lowest required staff cost, can be tens of thousands of dollars a year. Compliance failures (late filings, failed testing left uncorrected) carry real penalties, so who is responsible for each task deserves to be written down, not assumed.
Related terms: Recordkeeper · Plan Sponsor · Nondiscrimination Testing · Safe Harbor 401(k) · Cash Balance Plan