Know Your Responsibilities When Outsourcing Certain Benefit Plan Functions


By Timothy Hammer

The hiring of third-party administrators (TPA) does not relieve plan administrators of their fiduciary responsibilities regarding the operation of certain aspects of their employee benefit plan. So often, I hear plan sponsors comment on their reliance on the third-party service provider managing certain responsibilities of the plan’s operations. However, I quickly remind them of the importance of monitoring the services provided by the TPAs in order to make sure that plan is getting the appropriate service and paying reasonable fees for these services.

Plan sponsors of employee benefit plans have certain fiduciary responsibilities, including the overall administration of the underlying sponsored plans.  Plan sponsors typically engage various TPAs for their plan such as a bank trust department, data processing bureaus, insurance companies, or other benefits administrators to assist in the plan administration. They outsource investment processing, participant recordkeeping, benefit payments and/or claims processing, usually to reduce plan costs and increase the efficiencies in administrating their plan.

It is important to note that the hiring of a service provider to perform any or all of the duties mentioned above is a fiduciary function that requires plan sponsors to periodically monitor the TPA to ensure that it is properly performing the agreed-upon services.

The U.S. Department of Labor has produced the publication “Meeting Your Fiduciary Responsibilities,” which includes information regarding the selection and monitoring of TPAs.

For further information on monitoring TPAs and related services regarding employee benefit plan administration, please contact Timothy Hammer.

Check out our website to receive more information on Schneider Downs ERISA and Employee Benefit Plans Advisory Group.



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