Having survived working for a very bad third party administration (TPA) firm, I always wonder how many errors are really created by the TPA or created by the TPA\u2019s neglect.<\/p>\n
A TPA sends a questionnaire form to the client to ask them about the owners of the business, as well as who can be a key employee, and some other vital information like controlled group and affiliated service group information.<\/p>\n
I once knew of a client who got a questionnaire from their payroll provider TPA. For key employee information for the top heavy test, the client thought that key employee was someone key to their operation. So the client checked off everyone as a key employee, including the folks who made $30,000. Since the payroll provider TPA just took the garbage info, they had a garbage result and they said that the plan was top heavy. Of course, a decent TPA would have bothered to ask the client on whether all the employees could really be a key employee, according to the actual definition of key employee.<\/p>\n
When I was working for that TPA, a former politician started a defined benefit plan for his consulting business. About a year later, he was so amazed by our work that he asked whether we could take over his firm\u2019s 401(k) plan. What 401(k) plan? Call me crazy, but when starting a plan for a new client, you should always ask whether they have any other retirement plan for a wide variety of compliance issues.<\/p>\n
From my 12 years as an ERISA attorney, I learned that you could only get the right answers if you ask the right questions. \u00a0Whether you are a TPA, an ERISA attorney, or financial advisor, you need to probe your client when the answers to your questions don\u2019t seem right. Don\u2019t assume that the client understands your questions, especially if it relates to the operation of a retirement plan. I had a client who claims they never saw their plan document, so you should never assume that the client is giving you the correct answer.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Having survived working for a very bad third party administration (TPA) firm, I always wonder how many errors are really created by the TPA or created by the TPA\u2019s neglect. A TPA sends a questionnaire form to the client to … Continue reading