Asset Based TPA Funds / Return to Plan (How?)

[BeanCounterBlues]

Suppose a TPA is hired by a plan whose asset holder (TPA is independent) pays asset-based fees to the TPA. TPA normally would offset those payments against the invoice TPA would generate for testing, Form 5500 etc.

For various reasons, TPA and client part ways before any work is done. TPA has received payments from asset holder and wants to return them because no services were rendered.

Investment holder will not accept the money.

What is the best way to approach this - send it to the new TPA who is providing services? Send it to the client and instruct them to put it back in the plan as earnings (not sure the asset holder can accommodate a deposit that is earnings and not a contribution).

Any suggestions? Predecessor TPA is not entitled to the funds and does not want to keep the money. No invoice rendered to client thus no billing available to offset. Thanks for any help.

[WDIK]

I would advise returning the fees to the former client and letting them work it out with the new TPA.

[Peter Gulia]

If a service provider treats an amount as a plan's assets, acting consistently with that treatment might suggest paying it to the plan's trustee.

However, a service provider (even if it is a non-fiduciary) might use extra care if it has knowledge that could lead a reasonable person to believe that the trustee might steal, or otherwise misuse, the plan's money.

[BeanCounterBlues]

Thank you both for your responses, that was my inclination as well (return to the Plan Sponsor, but please read on....). There's no risk to my knowledge that the Plan Sponsor would mis use the funds, the TPA just doesn't think it is right to keep the money - it really belongs to the participants because the TPA hadn't yet provided any services, but getting it back into the plan is going to be problematic.

Is there a problem w/ the TPA just cutting the check to the Plan Sponsor? If it's paid to the Plan (which I realize is where the money s/ go) the Trustee probably won't be able to cash the check (eg the corporate bank won't take it and neither will the asset holder because the asset holder doesn't have a mechanism for coding the deposit as earnings rather than contribution).

If the check is made payable to the Plan Sponsor then it will be off the TPA's books. Does the TPA really have to worry about what the Plan Sponsor ultimately does w/ the funds? The TPA is just trying to do the right thing and give back money the TPA is not entitled (ethically) to keep.

[WDIK]

but getting it back into the plan is going to be problematic.

The former TPA could certainly recommend that the plan sponsor forward these amounts as plan fees to the new TPA.