"Plan sponsors don't understand that across the board, pro rata contribution models may not be what is ideal," Rosenbaum said. "When it comes to sophistication in plan design it could put more money in the employees' pockets and less money in the pocket of the government."

He added that plan sponsors also need to realize that hiring the cheapest provider may not be the best option for them.

Rosenbaum, who is an ERISA attorney, said that he believes the most important service provider a plan sponsor has is their TPA/recordkeeper. "A good one goes a long way to avoid plan compliance errors and maximize employer contributions and creates a lot less of a headache than if you go with someone who is not up to snuff," he said.

"The worst thing a plan sponsor can do is shop based only on price. Shop for value, what you are getting for your money spent," Rosenbaum said.  "Someone may be offering something cheap, but if their services are lackluster and negligent, you will pay more in compliance fees."

TPA use isn't just growing among the smallest companies, said Jeff Schreiber, vice president of TPA business development at The Principal. It also is working up market.

Recent data from the Plan Sponsor Council of America found that TPA use among 403(b) plans also is on the rise.

The 2011 403(b) Plan Survey showed an increase in the percentage of 403(b) plan sponsors who use TPAs, from 24.6 percent in 2010 to 28.7 percent in 2011. The survey also dispelled the myth that TPAs only work in the small plan market, with 56 percent of survey respondents with 1,000 or more participants saying they also use third party administrators.

The Principal, which sponsored that survey, has spent a good deal of time and money looking at what tools and information third party administrators need to do their jobs better. The company has developed a website dedicated to aiding these retirement plan practitioners through all aspects of retirement plan administration online.

"With the ever-changing regulatory and legislative environment, the responsibilities of being a plan sponsor and a fiduciary for the plan are increasing, not decreasing," Schreiber said.  If employers want to offer a plan to employees, they need to make sure it is designed the right way and meets all of the regulatory requirements.

He added that if he were a plan sponsor he would scrutinize the institution or recordkeeper behind the third party administrator to make sure they were experts on plan design and regulatory issues.  "TPAs are very well positioned to do that," he said.

The Principal's TPA website now offers compliance information, marketing tools and advice on how to get into prospecting for new clients and helping existing ones.

"From The Principal's standpoint, the role a TPA plays in the model going forward, we are trying to do what is best for advisors and plan sponsors. It is increasingly evident to us, the role of a TPA is important for us to support. We are a big believer in the value they play in the equation," Schreiber said. "We will do everything we can to support it."

Bob Benish, interim president and executive director of the Plan Sponsor Council of America, said he has talked to a number of plan sponsors about the issue of third party administrators and most agree they will continue to play a major role in the retirement industry.

"Under ERISA, they don't assume everyone to be an expert, but they do expect you would use the expertise available to you in the marketplace to get the information you need to make a correct decision as a fiduciary," he said.

The overwhelming majority of small and mid-size plan don't have the expertise inside their company to do the job well, he said. "It behooves them to go to outside firms that know about fee disclosure and other plan-related information that can help them implement the best program possible for their employees," Benish said.

He added he remains a big supporter of TPAs.