Understanding Salary Reduction Agreements & Contributions
At MidAmerica, our independent Third Party Administration line of business follows guidelines and procedures that are often quite different from other popular benefits like Health Reimbursement Arrangements and Special Pay Plans.
The reason for this? Our 403(b) / 457(b) TPA line of business is a non-asset holding service. Unlike our other plans, we do not invest TPA plan funds with the investment provider MidAmerica has partnered with. Instead, in order to maintain our completely independent* status, we remit funds to the plan’s approved investment providers on behalf of the employer, alleviating their administrative burden. TPA plans are also a voluntary plan, meaning the employee can choose whether or not to participate.
Salary Reduction Agreement (SRA) & Contributions Process for TPA Plans
It all starts with an SRA. Once the plan has gone through implementation, it comes down to whether or not employees wish to participate. During implementation, the employer will receive a TPA Enrollment kit they can provide to their employees. This kit defines the plan, explains the plan resources, and offers detailed instructions on how to enroll.
If the employee decides to contribute to a 403(b) or 457(b), they would first establish an account with one of the plan’s approved investment providers, then download the SRA and return to MidAmerica. Once the SRA has been processed by our team, the employee is enrolled in the plan; deductions from their paycheck will begin once we notify their employer via an SRA Report.
An SRA Report is uploaded to the employer’s online account on either a weekly or monthly basis, depending on the plan. Once the report is uploaded, an email is sent notifying the employer of the report. This report captures any SRAs received from their employees that week or month. Why do we send this report? It lets the employer know which employees have elected to participate in the plan, their election amount and when to begin deducting this election from the employee’s paycheck.
Once the employer receives the SRA report, they typically process it with their next available payroll so they can begin deducting the employee’s election from their paycheck. The employer will then complete our Contribution Data Template, which is provided at plan setup. The Contribution Data Template provides critical census information that allows us to remit employee funds appropriately to the plan’s approved investment providers, as well as monitor contribution limits. Employers provide this information to us according to their payroll frequency.
Common Remitting Breakdown
If the Employer Utilizes our Common Remitting Service
This service greatly alleviates the employer’s administrative burden and is offered at a nominal fee. With our common remitting service, the employer would send one lump sum payment for all employee contributions deducted during that payroll cycle, regardless of how the funds should be allocated among the employees and their investment providers. This funding is sent along with their Contribution Data Template. MidAmerica then takes that one lump sum payment and remits the funds to the appropriate investment providers according to the participant elections.
If the Employer Does Not Utilize our Common Remitting Service
Employers only send the Contribution Data Template, which is then uploaded into our system so that we can monitor the contribution limits. In this situation, the employer is responsible for sending separate payments to each of the participant’s chosen investment providers according to the participant’s elections. For example, if an employer has 100 participants who are each contributing to five different investment providers, the employer is responsible for remitting a total of 500 different payments.
Once the contribution data has been received and the funding has been remitted to the investment providers, participants are able to make election changes, update personal information, and submit future SRAs online through https://filexchange.mymidamerica.com.
To request distributions or monitor their investments, they would contact their chosen investment provider. Participants and employers can access a list of the plan’s approved providers and their contact information by logging into https://filexchange.mymidamerica.com.
It’s important to keep in mind that our TPA line of business operates differently than our other benefit solutions because 1) it is a non-asset holding service and 2) it is a voluntary benefit that the employee can choose to participate in or not. If you should ever have any questions about TPA Plan Processes, don’t hesitate to contact our TPA department at 403bTPA@MyMidAmerica.com.
*Independent means we are completely neutral to the investment providers chosen for the plan. We do not endorse or suggest any particular provider to employers utilizing our TPA line of business.