General: Why does my employer need a TPA?

Tax Deferred Solutions (TDS) is contracted by your employer to administer its 403(b) and / or 457 plan. Administration of these plans includes making sure they are in compliance with Internal Revenue Service regulations. Effective January 1, 2009, the IRS made significant changes to the management and oversight requirements for certain plans.

Prior to the changes to the regulations in 2009, the providers of investment products were responsible for establishing accounts, recordkeeping, and authorizing distributions, as well as tax withholding and reporting. These obligations, which had not been previously associated with sponsoring a 403(b) plan, are now the responsibility of the employer or an appointed plan administrator.

This regulatory change requires significant coordination between all investment providers under the plan for any transactions performed on behalf of a plan participant. The information needed to administer the 403(b) or 457(b) plan often is not held by a single party, but by multiple entities including the participant, investment provider, and employer. The plan administrator appointed by your employer is required to coordinate this information among all parties involved. As your employer’s plan administrator, TDS acts as a conduit of information that is used to perform the daily administrative functions required under the plan document, such as monitoring contribution limits, certifying hardship distributions, and coordinating loans with multiple investment providers.

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