Since 1974, business owners who have stepped up and established retirement or health insurance plans to provide benefits for their employees have been regulated by the Employee Retirement Income Security Act of 1974 (ERISA).
Those who take on fiduciary responsibilities to administer and manage ERISA benefit plans must do so carefully, under the statutory framework and the regulations and guidance issued by the U.S. Department of Labor (DOL). One important responsibility is to identify the plan's needs for services and to select competent professionals to assist the plan fiduciaries in carrying out their duties under ERISA. Enlisting the appropriate criteria to find and retain the right third-party administrator (TPA) can go a long way in ensuring the smooth and cost-effective operation of the plan.
Failing to engage in a prudent process to select the appropriate TPA for an ERISA plan can result in dire consequences: plaintiffs, including the DOL, have not been shy about suing insurers and TPAs alleging violations under ERISA and seeking maximum damages.
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