I’ve been practicing ERISA law for a long time, and one thing that continues to amaze me is when a plan sponsor discovers a mistake that the plan provider should have caught.
The plan sponsor shouldn’t be your quality-control department.
Whether you’re a TPA, recordkeeper, payroll provider, adviser, or another service provider, the client is paying you because this is what you do for a living. They shouldn’t have to discover that an employee entered the plan late, that a contribution was calculated incorrectly, or that information didn’t properly transfer between payroll and the recordkeeper.
Mistakes happen. I make mistakes. Everyone does. The issue isn’t whether a provider will ever make a mistake. The issue is whether the provider has procedures designed to catch mistakes before the client does.
Too many providers rely on the plan sponsor to review reports without understanding that most sponsors don’t know what they’re supposed to be looking for. That’s why they hired you.
Quality control costs money. It requires experienced employees, proper procedures, checks and balances, and sometimes another set of eyes. That’s not wasted overhead. It’s part of providing the service you’re being paid to provide.
I’ve seen providers lose clients over errors that weren’t necessarily catastrophic. The real problem was that the client discovered the mistake first. Once that happens, the sponsor starts wondering what other mistakes haven’t been discovered.
That’s when confidence disappears.
Plan providers sell expertise. They sell service. Most importantly, they sell the comfort that someone knowledgeable is watching the plan.
If your client has to constantly check your work to make sure you’re doing your job correctly, you’re no longer providing that comfort.
You’re giving them another job.
And eventually, they may find another provider.