Is your “affordable” TPA software quietly costing more than you think, even as many finance leaders believe that sticking with legacy tools like PensionPro or FTWilliam is a smart way to control expenses? The logic seems sound because familiar software, low licensing fees, and no need to retrain staff all appear to keep costs down. Yet, when reviewing annual financials, the real cost of these legacy systems often comes as a surprise.

Hidden costs with outdated 401(k) and payroll software refer to expenses that donʼt show up on an invoice but steadily eat into profits. These include excessive manual labor, compliance risk, and onboarding delays. The issue extends far beyond license renewals. Itʼs about the silent drain on resources, the risk of regulatory penalties, and lost opportunities due to slow client onboarding.

This post will help finance directors and CFOs spot and measure these hidden expenses, making it easier to see how modernizing with the right technology can lead to measurable savings and fewer headaches.

“Cheap” TPA software is often defined by its low licensing fees, familiar workflows, and minimal upfront investment. On paper, these solutions seem to protect margins. However, the real story is written in the hours and dollars lost to inefficiency and risk.

Hidden costs to watch for include:

• Manual labor: Staff spend extra hours on data entry, error correction, and reconciling payroll data that could be automated.

• Compliance gaps: Outdated tools increase audit exposure, create opportunities for missed deadlines, and raise the risk of regulatory penalties.

• Onboarding delays: Slow client setup frustrates sponsors and delays revenue recognition.

Automating census and payroll workflows saves TPAs an average of $20–$500 annually per plan in administrative costs. One finance leader shared, “We thought our old system was saving us money until we saw how much time our team spent fixing errors.”

Itʼs easy to assume that low software costs equal real savings, but in practice, the opposite is often true. The longer a firm waits to modernize, the more these hidden costs add up.

Letʼs break down the three main areas where legacy software quietly drains resources, revealing the true impact on your firm.

Manual Labor

Manual processes are expensive because staff may spend hours each week consolidating payroll data from multiple sources, reformatting files, and correcting errors. Without payroll census integration, these repetitive tasks quickly become a significant burden.

Stax.ai reduces census processing time by up to 75%. For a mid-sized team, this can mean thousands of dollars in wasted labor every year. Automation can reclaim this time and allow teams to focus on higher-value work.

Compliance Exposure

Relying on outdated TPA firm compliance tools is like driving with a blind spot. One missed regulatory update or data entry error can result in costly penalties and damaged client trust. Automated scrubbing against plan document provisions eliminates 98% of errors before TPA review.

Common compliance risks include:

• Missed regulatory updates,

• Incomplete audit trails,

• Data entry mistakes.

Each incident not only carries direct costs but also increases audit scrutiny and reputational risk, making the impact even worse.

Onboarding Bottlenecks

New plan onboarding should be fast and seamless. However, legacy systems often require weeks to set up new clients, with manual steps at every turn. This leads to frustrated sponsors, delayed revenue, and lost opportunities.

Modern software for retirement planning can cut onboarding time in half. Faster onboarding means happier clients and a quicker path to revenue.

These hidden costs—manual processes, compliance risk, and onboarding delays—not only eat into margins but also create operational drag and expose the firm to unnecessary risks. Finance professionals are under constant pressure to control budgets, improve efficiency, and reduce risk, and outdated software stands in the way of all three goals.

Modern platforms solve these problems by offering client portals for retirement plans, automated workflows, and real-time compliance tools. Instead of fragmented processes, teams get a single source of truth that streamlines operations.

Key benefits include:

• Automation: Census, payroll, and compliance tasks are handled automatically, reducing manual steps and errors.

• Real-time integrations: Platforms like Stax.ai connect with over 221 payroll providers, covering 46% of plan sponsors via API.

• Modern client experience: Secure portals allow sponsors to upload documents, track tasks, and communicate in real time.

Stax.aiʼs AI reduces email and task management time by 30–50%, allowing staff to focus on higher-value activities. One finance director noted, “Switching to Stax cut our admin costs by a third and let us onboard new plans in half the time.”

The operational benefits are clear. Fewer manual steps mean less rework and more time for higher-level projects. Total cost of ownership drops when you consider labor savings and lower risk. Clients are happier because they get faster, more transparent service.

Investing in modern pension software is not just about technology. It gives firms a way to grow, work more efficiently, and manage risk.

Legacy softwareʼs hidden costs often outweigh the apparent savings from low licensing fees. Manual labor, compliance risk, and onboarding delays quietly eat into margins and increase exposure for TPA firms.

Finance leaders need to look beyond the invoice and consider the true cost of outdated tools. A real cost analysis that includes all operational, compliance, and onboarding expenses gives aclearer picture of where money is lost and where it can be saved.

Now is the time to review your current systems and think about the potential ROI of modernization. Moving to automated platforms can turn hidden costs into measurable savings and help your firm grow over the long term.

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How do I calculate the real cost of manual labor in my TPA firm?

• Track the hours your staff spend on repetitive tasks such as data entry, reconciliation, and onboarding.

• Multiply these hours by the loaded hourly rate, which includes salary, benefits, and overhead.

• Compare this total to the expected savings from automation to see your opportunity cost.

What compliance risks are most often overlooked with legacy software?

• The biggest risks include missed regulatory updates, data entry errors that go undetected, and the absence of a strong audit trail.

• Each of these can result in fines, increased audit scrutiny, and reputational harm.

How can I build a business case for upgrading our client portal for retirement plans?

• Start by quantifying current inefficiencies such as manual hours, error rates, onboarding delays, and compliance incidents.

• Estimate the potential savings and risk reduction from modern tools.

• Present the investment as a way to improve client satisfaction, reduce costs, and protect the firm from regulatory penalties.

For more information on modern solutions, consider evaluating Stax.ai alongside other leading platforms. Using data to guide your decision will help you choose the best path for your firmʼs future.