When I first started in the retirement plan business in 1998, I worked for a law firm that served as the counsel for a third-party administration (TPA) firm in Syosset, NY.<\/p>\n
There was an office worker there named Orville. I remember Orville because I never saw someone who was male who sang \u201cMy Heart Will Gone On\u201d, the Titanic theme song sung by Celine Dion.<\/p>\n
Orville wasn\u2019t much of a worker, but for some reason, my boss had an affinity for him. When the office work wasn\u2019t panning out, they made Orville a computer tech guy. I think Orville knew as much about computers as my grandmother did. When the tech thing didn\u2019t pan out, they put Orville in an administrative position of dealing with retirement plan distribution to participants. As my boss would probably say: \u201che\u2019s a good guy, he\u2019s loyal.\u201d<\/p>\n
Well, one day, Orville tried to overpay a participant $18,000 more than what the participant had in their account. The person managing the daily operation of this TPA had enough and Orville had to go. From what I was told, Tom had to call my boss to get permission to fire Orville. Never understood why my boss had this loyalty towards Orville. I thought it was a lot of misplaced loyalty.<\/p>\n
Loyalty is an admirable trait, but misplaced loyalty is another thing. I see that with many plan sponsors and their misplaced loyalty to their plan providers, which is not reciprocated but is betrayed. Plan sponsors should pick plan providers based on competence and they should check every so often to make sure these plan providers are doing their jobs. Just sticking by providers because you have retained them for so long is one reason to maintain that relationship, but it shouldn\u2019t be the only reason. I had a client being sued by the Department of Labor because the client had used a TPA for 28 years, and wasn\u2019t doing the necessary work in the administration of a defined benefit plan. Saying you used someone for 28 years is nice, you have longevity. It\u2019s not so nice if you discover that they didn\u2019t do the work and as a plan fiduciary, you are the one on the hook for what the plan provider did or didn\u2019t do.<\/p>\n
There is nothing wrong with always using the same plan providers, but there is something wrong is that the only reason you keep them is because you have been using them for so long. Every plan provider should be evaluated every so often to determine their competence because you may be shocked when your long-time provider turns out to have thrown you under the boss with poor work.<\/p>\n
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