Changing Third Party Administrator

[hch4cpa]

If a Employer adopts a Prototype Plan sponsored by its Third Party Administrator, can the Plan continue to use the Prototype Plan in the event the relationship with the sponsoring TPA is terminated? 

The Prototype Document in question contains the following wording - 

"The employer may discontinue its participation in this Prototype Plan effective upon sixty (60) days written notice to the Prototype Plan Sponsor. In such event the Employer shall, prior to the effective date thereof, amend the Plan to eliminate any reference to this Prototype" 

Would switching the Plan's TPA likely trigger "discontinuance" in the Prototype Plan? 

[Lou S.]

You can continue to use the document but your old provider is no longer updating it for you for any law changes. You will not be able to use their IRS Opinion letter and your plan may now be considered an individually designed plan that you are responsible for updating for any IRS required changes.

Typically your new provider will restate your Plan on to their document for a variety of reasons including not having to read through someone else's document provisions and having reliance on their own Opinion letter.

[ESOP Guy]

You might want to check some of the other agreements the client had with the prior TPA.  I have seen with some brokerage firm agreements outside the plan document saying the person agrees to stop using the brokerage firms document if they stop using the brokerage firm for trading/investing. 

In theory to keep using the old document would be a breach of contract. 

As Lou points out there are a number of good reason to change documents.  See what the new TPA is charging for the new document. Some make it part of the conversation cost.   Some charge extra but at a discounted rate.  

[Larry Starr]

15 hours ago, hch4cpa said:

If a Employer adopts a Prototype Plan sponsored by its Third Party Administrator, can the Plan continue to use the Prototype Plan in the event the relationship with the sponsoring TPA is terminated? 

The Prototype Document in question contains the following wording - 

"The employer may discontinue its participation in this Prototype Plan effective upon sixty (60) days written notice to the Prototype Plan Sponsor. In such event the Employer shall, prior to the effective date thereof, amend the Plan to eliminate any reference to this Prototype" 

Would switching the Plan's TPA likely trigger "discontinuance" in the Prototype Plan? 

The answer is "yes they can" but they should realize they should replace it as soon as they can.  As far as the IRS is concerned, it's still a fine plan document.