Signing up with a third-party administrator (TPA) is like getting married, you come in with the best of intentions and you never think that things won\u2019t work out.<\/p>\n\n\n\n
In 22 years of being an ERISA attorney, I have never met a plan sponsor who understood what the termination fees were when they signed up their contract. That\u2019s troubling because when things go south, there might be the sticker shock when a plan sponsor realizes what it\u2019s going to take to break free from a TPA that they want to get rid of.<\/p>\n\n\n\n
Deconverting a plan takes a lot from the TPA\u2019s side and any termination costs are a proactive way for TPAs to hold on to their clients, especially those who might fire their TPA the way that George Steinbrenner fired managers pre-Joe Torre.<\/p>\n\n\n\n
It\u2019s important for a plan sponsor to understand upfront, what it will cost them to break free when things go south. By the way, zero chance that a TPA will negotiate a termination fee the way you can negotiate a pre-nuptial.<\/p>\n
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