Once you've gone through all the trouble and expense of figuring out what types of retirement plan administration services you require and the specific type of TPA that will best meet those needs, you need to have a clear and comprehensive written services agreement with whichever TPA you retain to provide your retirement plan administration services.
Since the possible range of TPA services can vary from plan to plan and employer-to-employer, it may not be in your best interest to simply sign the "form" services agreement that a prospective TPA puts in front of you. It has been prepared by the TPA's attorney to provide it (not you) with the greatest legal protection.
What kinds of provisions are important to be included in your written agreement with your TPA?
- A clear understanding of who is receiving the TPA services. Is the employer/sponsor or the plan administrator retaining the TPA?
- A detailed description of the services to be provided by the TPA. This may necessitate the attachment of a detailed schedule of the TPA's standard services as well as any special testing and/or compliance services which the TPA has offered to provide (or which you require). If you hired this TPA as the result of an RFP process, the TPA's proposal should provide a good description of the services they propose to provide in connection with your plan.
- A clear understanding of the fees which will be charged for the services, including the rate at which additional fees may be charged for "special" projects. If the TPA proposes to charge for some or all of its work on an hourly basis, it is important to know what the current hourly rates are and to specify that these hourly rates cannot be significantly increased without your prior written notification. Consider also that some firms charge hourly fees for their secretarial and support personnel.
- If push comes to shove and there is ever a dispute over the services which the TPA provided or failed to provide, it may be helpful for the contract to contain a representation regarding the TPA's professional qualifications and the high standard of professional care they hold themselves to.
- There should be a provision describing the circumstances under which either party can terminate the agreement. In many cases, it may be appropriate for the employer to request significant advance notice of the TPA's decision to terminate the contract. On the other hand, there may be circumstances under which the employer may wish to terminate the TPA's services immediately.
- When you terminate the services of your TPA, there can often be problems in making sure that personnel records, plan records, and other relevant data are properly transferred to the new, successor TPA you have hired. In this regard, it is essential to have a provision in your contract which specifies that all such records belong to the plan sponsor and that the TPA agrees to cooperate in the transfer of all such records following the termination of the agreement.
- Because no one likes to pay attorneys to battle endlessly over such matters, you would be well advised to include a mandatory mediation and/or arbitration provision in your agreement so that disputes can be resolved more quickly and cost-effectively.
More often than not, employers who hire TPAs to assist them in the administration of their retirement plans justifiably place a great deal of trust and reliance on their TPA. Since failed advice or administrative support can result in significant financial and employee relations problems for the employer, it is essential that you clearly understand who is responsible. It is just good business to "look before you leap" and "get it in writing" before you retain your next TPA.