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TPA or Sponsor (client) to respond to employee requests

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Hi,

If a plan participant (active, or terminated employee) requests information regarding a qualified DC Plan that a company sponsors.1 Who is required to provide the information, the TPA or the plan sponsor/administrator (ie the client)? 2. Is the TPA prohibited from providing any information since the TPA is not the sponsor/administrator?  Thank you.

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As a TPA, my response was always, I may be able to assist you with general questions about the plan but I cannot give you any specific information over the phone.  I don't have any way to distinguish between you and your ex-spouse's private investigator.  Give "client contact" a call, they can call me and ask questions and if you are conferenced in, I'll be happy to help in any way that I can. 

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If you are talking about a true TPA (Third Party Administrator who peforms ministerial functions), then they have no fiduciary authority .  Therefore, the Plan Administrator/Plan Trustee/Plan Sponsor would be required to provide the information.  

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3 hours ago, Pam Shoup said:

If you are talking about a true TPA (Third Party Administrator who peforms ministerial functions), then they have no fiduciary authority .  Therefore, the Plan Administrator/Plan Trustee/Plan Sponsor would be required to provide the information.  

Thank you. In addition to the TPA not being required to provide the information, is the TPA legally allowed to provide any information? Thank you.

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A prudent TPA would not provide any information to a participant that the TPA’s contract does not require the TPA to provide.

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We talk directly to participants - a lot.  Maybe it's not prudent but it saves a lot of time and it's what sponsors pay us to do.  We try to qualify that we're not the Plan Administrator but probably aren't careful enough.  If someone is an a-hole then we tell them they have to talk to the PA.

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6 hours ago, Bird said:

We talk directly to participants - a lot.  Maybe it's not prudent but it saves a lot of time and it's what sponsors pay us to do.  We try to qualify that we're not the Plan Administrator but probably aren't careful enough.  If someone is an a-hole then we tell them they have to talk to the PA.

Ditto. Ditto. Ditto. DITTO. 

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This area is constantly evolving (for us, anyway) largely due to fraud/privacy concerns. We used to have more direct dealings with the participants, but in many situations we now won't talk to the participants without first checking with the client. In a couple of these situations recently, the "participant" turned out NOT to be the participant, even though they somehow had all the right information/identifiers at their fingertips. This added caution is particularly true when we are talking about account balances/distributions.

As I said, this is evolving, and we are sometimes forced to provide service that is less immediately prompt and helpful to a legitimate participant. This is difficult, as with a lifetime of providing fast and helpful answers, it goes against our conditioning to not provide an answer immediately - but that's the world we live in. The crooks are always getting more sophisticated, and we have to protect our clients, even when it means the speed of the service sometimes suffers.

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Back when I had my own firm, we had an addendum for our engagement agreement where a client could authorize and engage us to respond directly to participants. 

This gave us the chance to point out to a client ahead of time that our relationship was with the plan sponsor, describe what we would and would not provide to participants (we'd provide stuff they are entitled to under ERISA, but would not provide advice of course).  It further communicated to the client that this was an additional service beyond the regular administration work and was billable.  

Some clients would hand out our name and number to participants for virtually anything, and then not be happy when we billed them.  Finally when clients would not engage us to do this, we then had a nice simple response for their participants, the client has not authorized us to respond to them. 

This addendum process worked really well.  I tried to spread the idea around to other TPA friends but but it never caught on.  

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For those TPAs that are or might become willing to talk with a participant:

What identity controls might a TPA use to satisfy yourself that it's reasonable to believe an inquirer is the participant (or even a participant) rather than an impostor?

Big recordkeepers use regimes of controlled identifiers, passwords, and other restraints.  But which methods are feasible for a TPA?

Are there software solutions that are useful to help a TPA check an inquirer's identity?

(I'm not asking anyone to reveal a particular company's methods.  Rather, I'm asking generally about what TPAs might do.)

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Um ... What does your service agreement say?  It is critical that you not take on any responsibility carved out in your service agreement, and also that you do what you say you will do.

Talking to participants engenders risk.  There is a recent case where union officials who knew little about a pension plan gave participants advice about the plan anyway.  One such person told a dying participant that he should not terminate employment, but should die "in service" to best benefit his soon-to-be-widow.  He was wrong.  The widow sued. The court found that the union had breached its fiduciary duties by having people giving advice to participants who weren't qualified to do so.

There's nothing wrong with a TPA giving a participant information or advice.  But, the owner of the company should be the one deciding whether to do so and who is qualified to do so, and the service agreement should match.

IMHO.

 

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13 minutes ago, Ilene Ferenczy said:

There's nothing wrong with a TPA giving a participant information or advice.  But, the owner of the company should be the one deciding whether to do so and who is qualified to do so, and the service agreement should match.

IMHO.

 

Exactly.

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Imagine that a TPA has made the business decision, and a service agreement specifies the communications services the TPA provides (and, perhaps, a fee for those services).  And assume the TPA prefers to avoid discretion and otherwise to provide services only as a non-fiduciary.

In those circumstances, the TPA might prefer that a plan's administrator specify the methods the TPA uses to identify whether an inquirer is a participant.

That returns to my question:  What identifiers and methods might a TPA suggest?

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BITD when we did this (15 years ago), we would not engage with terminees until notified of the termination directly by the plan sponsor.  Would then ask the participant for name, DOB, SSN and DOT.

For ongoing participant inquiries, client had a choice of providing us the name of participants in advance, or utilizing a password.   IIRC pretty much all clients chose the notification in advance option.  We'd ask for the caller to verify name, DOB & SSN. 

We were not recordkeepers, so while we were providing plan information, we were not initiating any transactions, so it seemed good enough at the time. 

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Unless and until there is some reason for it to change, the responsibility (and liability) is all on the Plan Administrator. If the Administrator hires someone (like a TPA) to execute its responsibility, the Admin. had better make sure that the party being hired is willing to act as a fiduciary -- because it could very well be one. The thing that I see more and more often is TPA contracts providing for services that are clearly fiduciary services, but that provide that "under no circumstances shall [TPA] be considered to be a plan fiduciary" blah, blah, blah, as if such a disclaimer would mean something against anyone but whoever signed the contract.

Anyway, my point is that a TPA can and should do what it is hired to do, but it should also make sure that it can pay the price, so to speak. If it's going to perform fiduciary functions, it should be ready to step up; otherwise it shouldn't agree to perform them. If it believes that it can do whatever it wants, and simply say that it isn't a fiduciary, then have at it and best of luck. But, it should act according to its contractual commitment, and it should agree in its contract to do only those things for which it is willing/able to take responsibility.

 

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