Do recordkeepers get arbitration provisions?

[Peter Gulia]

Do retirement plans' recordkeepers include in a service agreement a provision for arbitration of disputes.

If a standard service agreement includes an arbitration provision, can an employer negotiate to delete that provision?

How big does a plan need to be to have negotiating power on that point?

 

[Bill Presson]

Generally all of them do, I'm pretty sure. I don't remember seeing one that didn't.

Obviously an employer can negotiate anything.

I don't know the number, but I would have to think it would need to be pretty large.

With all that being said, why would an employer feel it was necessary to eliminate that provision?

[Doghouse]

There are reasons why both the recordkeeper and the plan sponsor might not like the arbitration provision. If ever utilised, what you will find is that the arbiter will almost always split the difference between the two parties. There is almost never one party determined to be at fault and held financially responsible.

[Belgarath]

Is it possible to have an arbitration clause that provides that the decision will be "all or nothing?" In other words, that one party's position will be chosen - no splitting the difference. Seems like I've heard of this in things like salary contract negotiations with unions, which of course is a different thing anyway. Just wondered - as a non-lawyer, I'm not sure how well, if at all, such a provision could even work in a TPA/Client contract.

[Peter Gulia]

Another difficulty of arbitration is that a disputant might be unable to bring into a proceeding all the parties and evidence-givers needed to resolve its dispute.  (An agreement to arbitrate binds only the parties to the agreement.)

What happens when an administrator's defense is that it reasonably relied on the work of a service provider beyond the one it has a dispute with, but that other service provider has not agreed to (and refuses to participate in) the arbitration?

[Doghouse]

We had a client who refused to pay our bill because we weren't able to eliminate his contribution requirement, while some questionable practitioner across town was able to. In my mind we had a service agreement and our invoice was in accordance with the terms of that agreement - yet, the arbiter split it down the middle. An all-or-nothing restriction is an interesting concept, although I'm not sure always appropriate. I am sure there are situations where both parties have some responsibility. Just not all of them. 

[My 2 cents]

Arbitrators are supposed to develop their decisions using sound analysis of the facts and the applicable legal documents (i.e., your service agreement).  There are such arbitrators, but if the perception is that the tendency is for arbitrators to arbitrarily split it down the middle because doing otherwise would require hard work and might anger one side or the other, that is a problem.  That is not how arbitration is supposed to work.

If your case was decided without regard to the merits, perhaps you should be glad that the decision was not to award you nothing because that client is a frequent filer with the arbitrator.  It seems unlikely that a careful analysis would have given you less than your agreed-upon fees if the only aspect that was less than fully satisfactory was that the client did not like your answer.  Was a justification given for splitting the amount in the arbitrator's decision?

By the way, if the new actuary is really "questionable", have you thought about reporting them to the Actuarial Board for Counseling and Discipline for possible violations of the Code of Professional Conduct?  The days when "How much do you want it to be?" can be given as the answer to "How much is two plus two" have, one hopes, long ago ended.

[Doghouse]

I no longer work at that firm, and in any case, that decision would have been up to the owner. There was very little justification given for the decision. Of course, one must recognize that the arbiter is not an actuary. This was just one example, though. We had at least three such situations before removing the arbitration clause from our service agreement.