Changing Your TPA

Problems may arise when employers change their plan’s TPA and do not notify the product providers, the plan participants or the former TPA.

In the absence of such notification, all parties continue to interact with the former TPA, but plan transactions are not processed or approved. Delays occur, contributions are not processed, information is not provided and a logjam develops.

Best Practices

Every relationship with a TPA is different and will be subject to the terms of whatever the service agreement between the employer and the TPA provides.

Following are general recommendations based on successful transitions that have been made in the 403(b) marketplace:

• Before looking for a new TPA, the employer should identify the services desired, either through an RFP process or another process consistent with your organization’s policies and procedures.
• The employer should evaluate the services proposed by the prospective TPA to determine whether they are consistent with the plan’s needs before making any decisions, and definitely before signing any service agreement.
• Since the possible range of TPA services may vary, employers should ask for a detailed description of the new TPA’s service offerings and the fees associated with those services. If the new TPA is selected through the RFP process, the TPA’s proposal, along with any subsequent negotiations, should provide sufficient information.
• Now that the new 403(b) Prototypes/Volume Submitter Plans are available, employers can also use the Administrative Appendix to compare the TPAs that they are considering.
• Once a decision is made to change the TPA, the parties must create a timeline to ensure a smooth transition for employees and approved product providers. The timeline should extend from 45 and 60 days. (In some cases there may be reasons to pursue a shorter transition.) Employees and product providers should also be informed.
• Contributions and distribution requests must be sent to the correct location, based upon the TPA service model that you have selected.
• When the current TPA is terminated, problems transferring plan data to the new TPA may arise. All parties must anticipate this and allow for the time it will take to: (a) identify the data that will be transitioned; and (b) move this data correctly and completely. The employer must work with both TPA firms to determine an agreed timeframe and format for this exchange. Terms of the service agreement with the current TPA may impose limits on one or more of these variables.
• The employer should determine what authority is required, if any, to implement the change in TPA. This may include a Board resolution that terminates the current TPA and contracts with the successor TPA.
• The employer must ensure there is no gap in compliance oversight between the former TPA and the new TPA. This may require instructions to product providers regarding how to handle transaction requests received during any gap period between TPAs.
• Employer should establish the new contact at the new TPA and identify the best method of communication.
• If there is a change in the TPA or any change in administrative responsibilities, the change should be reflected on the Plan Feature Grid and the revised Grid should be sent to all authorized product providers.
• The plan participants should also be notified of any changes to the TPA and the effective date of the change, including the new contact information.
• Communicate the effective date of the TPA change with all approved product providers and give them necessary contact information on the new TPA. If product providers are required to share data with the TPA in a particular format (such as SPARK data, or other confidential participant account data), an agreement directly between the TPA and the product provider may be required, if one does not already exist.
• The employer should complete and sign new service agreement with the new TPA, which should include any services that you have agreed upon as well as a description of general support in the event of problems, errors or IRS audits.
• The new TPA should send any necessary documentation to affected participants and product providers.
• The employer should determine if the new TPA will undertake any responsibilities that employer currently has. If it will, a plan to transition such responsibilities should be established.
• The employer should determine any changes for contribution or distribution processing including web access, banking issues, data movement and service requests.
• The employer should require the new TPA to report progress throughout the transition so that it can be monitored.

More information on changing a TPA, as well as a host of other topics relevant to running and building your practice, can be found in the Best Practices Guide for 403(b) and 457(b) Plans. Information about the Best Practices Guide for 403(b) and 457(b) Plans is available here.

Thomas J. Granger CLU, CPC, REBC, CPFA is Second Vice President , Qualified Plans at Security Benefit.