While third party administrators (TPAs) of employee benefits have been around for decades, there still remains misconceptions regarding their role and capabilities. Some plan sponsors equate a TPA with their in-house plan administrator or plan recordkeeper. Others hold false ideas regarding how much of their staff’s time will be consumed by working with a TPA.
First, TPAs have far more responsibilities than plan administrators. Secondly, when a qualified TPA is contracted the interaction is seamless. In fact, it can be a great burden having to manage the complexities of an employee benefits plan, and then to administer it. TPAs help to ensure compliance with all relevant laws and regulations. Let’s address some other misconceptions.
Common Misconceptions about TPAs
Following are some other misconceptions about TPAs:
- My financial advisor, working with in-house plan administrators and recordkeepers can do the same job as a TPA. The truth is a financial advisor can refer and work along with a TPA and play a role in ensuring regulatory compliance, but their role is very different.
- Only small businesses need TPAs. While small and self-insured businesses do seek the help of a TPA, so do mid-size to large corporations, multi-employer plans (Taft-Hartley plans), small unions and non-profits.
- Our Board and Officers are responsible for compliance and not the TPA. While it is true that failure to comply with laws and regulations governing employee benefits will result in penalties for the organization, TPAs, who stay abreast of the latest regulatory developments play an important role to ensure compliance and avoid hefty penalties.
- All TPAs offer the same services. This is not true as some TPAs focus primarily on health plans, for example, while others service pension and annuity plans; health, dental and disability claims processing; health and welfare funds; and also provide payroll auditing; medical stop loss insurance; utilization management; and print member or employee communications.
To gain the most benefit from a TPA, seek an experienced, qualified firm with on-staff professionals, up-to-date employee benefits software to facilitate efficient and accurate claims processing and documentation, and who are cost-competitive.
