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Plan is a self-insured plan that contracts with a Non-traditional Third Party Administrator. The TPA does not collect any premiums or pay out any claims (claims are handled by Care First). Carefirst adjudicates all claims, and debits an account belonging to Plan Sponsor.

Role of the TPA is to process enrollment, provide other administrative services(billing, prepare 5500s, PPACA reporting, consulting, etc), for which it receives a "fee for service." Additionally, TPA collects and remits to CareFirst the fees paid by Plan Sponsor.

Since TPA does not "handle" plan assets and does not exercise any discretion or control over the Plan, it is our belief that the TPA does not fall under the ERISA definition of Fiduciary. Would you agree?

If TPA is arguably not a fiduciary, would an argument exist that the TPA is not required to fulfill the ERISA bonding requirements under Section 412? A review of Field Assistance Bulletin No. 2008-04 leads me to conclude that since TPA does not "handle funds or other property" of the plan (merely collects ans remits a fee to Carefirst) and does not adjudicate Claims, it would not be deemed a "Plan Official."

Thoughts? Thank you...

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Seems that it ought to work that way. No discretion or control should mean not a fiduciary, and no direct handling of plan assets should mean no bonding needed. Have you encountered contrary opinions?

Always check with your actuary first!

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Among some ways to appease a customer's request of this kind:

Try putting in the service agreement: "TPA, at its expense, shall be bonded to the extent required of the TPA under ERISA section 412."

That might allow a customer to believe it obtained a contract promise, while also allowing the TPA to believe it meets that obligation by doing nothing (if the TPA is confident it never handles any money or other property of any employee-benefit plan).

Another way: Find a friendly insurer (with an intelligent underwriter, a smart actuary, and a smart accountant) that will issue a fidelity-bond insurance contract with a coverage limit of $1,000 (which the TPA believes is more than ten percent of the amount handled) for a minimum premium.

IhrtERISA, how confident are you that the TPA never handles any property of a plan?

Have you considered the possibility that a plan's records might be the plan's property?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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