What are the fiduciary responsibilities of a TPA and a Bundled Service

[Guest UKH]

If a provider is ready to hold on to the investments as well as do the administration work but are not ready to be trustees of the plan are they considered to be a bundled service provider or are they classified as a TPA.

I am trying to find out whether fiduciary responsibilities between Bundled Administration and TPA service differ?

I understand the type of service each one performs but what distinguishes a Bundled Service Provider from a TPA.

[Guest]

Fiduciary responsibilities do not necessarily differ between bundled service providers and TPAs, depending on the services they provide. For example, both a bundled service provider and a TPA may offer investments that are available to the plan sponsor, however, unless they are providing investment advice to the plan, they would not be considered to be a fiduciary. So in this case, both are providing the same type of service and neither one would be considered a fiduciary. They are just providing investments that the plan sponsor on their own selects, or using some other investment advisor (such as a broker or RIA) helps them to select.

A bundled service provider, like Nationwide for example, provides investments via a group annuity product, they provide daily recordkeeping, update prices, place trades with the investment providers, and create participant statements. However, they are not acting in a fiduciary capacity. Typically, there is an outside broker or RIA involved that receives compensation for selling the group annuity and that works with the plan sponsor in selecting the investments that will be offered to the participants.

A TPA that is providing in-house daily services may also make available investments that an outside broker or RIA reviews with the plan sponsor and makes recommendations on what investments might be offered to the participants. The TPA would track participant accounts, place any trades with the investment providers, create participant statements and handle all compliance testing for the plan. The TPA would also not be considered a fiduciary under the plan.

As you can see, the TPA and the bundled provider are providing the same types of services. However, the bundled provider usually custodies the assets for the plan. In that capacity, they still would not be considered a fiduciary to the plan. They would have a custodian agreement with the plan sponsor indicating that they are just acting in the capacity of custodian, to help the ease of moving money to and from the investment providers. Typically, TPAs do not perform a custodian function.

A TPA or bundled service provider could be considered to be a fiduciary if they received compensation from the investment providers, or received payment from the plan sponsor to provide investment advisory services. Then, in that situation, they could be construed as acting in a fiduciary capacity.