TPA Going out of Business

[Guest Admin]

I am a financial Advisor in S. California and a TPA I use for Administration and the movement of money may be going out of business. Does some Govt Agency come in and support the operations staff to transfer the monies and data transfer once the company can no longer meet payroll. The TPA is also the custodian of all the assets and obviously the legal owner. I have several large cases and simply do not have the time to move them in time to avoid the posibility. Has anyone gone through this or heard of this situation and what happens.

Thanks

[Demosthenes]

You need to check the bankruptcy laws in CA to be sure, but a typical scenario would be for the business to go into receivership and for the custody to move under the court appointed bankruptcy trustee.

Your clients are then likely to be in a world of hurt since unraveling the assets is likely to be delayed by the rest of the bankruptcy proceedings.

Not knowing the details, I can't comment on the difficulty of moving clients in whatever time may be left. However, IMO your best course of action is to find a TPA willing to take on all of your clients at one time. A migration as opposed to a one by one conversion to a new TPA.

Even if the effort to find a successor doesn’t pan out, you should at least be able to demonstrate to your clients that you made a serious effort to get them out before the end.

[GBurns]

I have just got to ask the readers of this Board to help me on this one.

Is it normal for the TPA to:

1. Hold the money in their own account?

2. To be the custodian of the assets?

3. To be the "legal owner" as intimated here?

In my limited experience the TPA is the recordkeeper, the Trustee is the custodian, the investment holds the assets and the "legal owner" is the plan participant.

What is normal or most prevalent?????

[stephen]

The TPA's I have worked for were TPA's not trustees or fiduciary's.

[Kirk Maldonado]

You might want to consider contacting the DOL on this one.

[Guest consultant]

Is the TPA also the recordkeeper? If they are, define "Hold the money in their own account?" Does this mean the company checking account or in an Omnibus account?

If the TPA is the recordkeeper, they could be the custodian of the assets as long as the proper custodial agreements are in place.

The "legal owner" is the plan, but they actual owner is the recordkeeper unless they are buying individual securities for each plan.

I would certainly contact the DOL. This could turn into a bad situation for you and the participants. ie: Enron