Services Agreement / Amount of Advance Notice to Terminate

[BeanCounterBlues]

Assume small TPA firm has services agreement with small 401k safe harbor plan to provide compliance testing, calculate contributions, and process 5500. Plan sponsor advises TPA that Plan Sponsor is undergoing bankruptcy. 2007 completed services, have not been paid for. 2008 5500 coming due soon (7/31/09).

Relationship is good, no acrimony, and amount of past due invoice immaterial to TPA's practice and TPA willing to just let it go in order to not spend time trying to collect.

TPA wishes to terminate agreement to provide services so as not have to complete 2008 work (eg knows won't be paid).

Service agreement doesn't cover specific time periods and says that written notice may be provied by either party to terminate. Service agreement doesn't specifically state how much advance notice must be given. If notice were given now (eg May 2009) that services are terminated and the written notice states that the 2008 services will not be performed, does this alleviate the TPA from having to complete the 2008 work.

I know technically this is a request for a legal opinion that but that is not what I am really after. I am more or less curious if others have run into this issue and how they have handled from a timing standpoint in terms of what is "reasonable notice."

Thank you for any assistance.

[Below Ground]

Our agreement uses a 60 day notice. We also have a clause that says if we are not paid (or have been paid), we are not responsiblity for anything not done under any circumstance. A comprehensive agreement when engaged for service is important IMHO.

We have been down this road too. Our counsel told us that (regardless of our agreement) we are not liable to provide any service for which payment was not received. (As a business we are not responsible if not compensated for service.) We were told that simply writing a letter now saying no further service would be provided given lack of past payment was enough.

Many of us try to help out others in distress. There does come a point when enough is enough. If you have reached that point, I suggest that you check with your counsel and then end the relationship.

[BeanCounterBlues]

Below Ground - thank you, that's exactly what I was thinking (and yes would like to help this person who's going through tough time but you can only do so much). Regards.

[Peter Gulia]

To pay for reasonable services that the plan needs for its administration, consider also at least two more possibilities:

A retirement plan could pay from the plan's (not the employer's) assets.

A bankruptcy trustee might choose to assume its debtor's service agreement with a TPA, with the retirement plan or the bankruptcy estate (to the extent that an expense is necessary but not chargeable to the retirement plan) paying the TPA's fees.