A long time in a galaxy, far far away (the time before fee disclosure regulations), I talked to the top salesman of a certain third-party administration (TPA) firm that charged an asset-based fee. The TPA wasn\u2019t a producing one, they just did the TPA work.<\/p>\n
I asked the salesman why they priced plans that way because my experience working for TPAs is that it\u2019s no more to run a 100 person $100 million plan than a 100 person $10 million plan, that TPA work is based on the number of heads (accounts). I believed that pricing based entirely on assets wasn\u2019t rational.<\/p>\n
Well, some ERISA litigators feel the same way. One of the big staples of the Trader Joe\u2019s case is the fact that Trader Joe\u2019s TPA fees are asset-based and therefore, aren\u2019t rational or prudent under ERISA. \u201cThe cost of recordkeeping services depends on the number of participants, not on the number of assets in the participant\u2019s account. Thus, the cost of providing recordkeeping services to a participant with a $100,000 account balance is the same for a participant with $1,000 in her retirement account.\u201d I\u2019ve been saying that for years, the only difference is that I\u2019m not suing anyone.<\/p>\n
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