The Importance of Due Diligence in Choosing a TPA

DWC | 04/19/18

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Choosing a third-party administrator to manage your company's document design, compliance or government reporting services should be based on careful due diligence, rather than on the price of fees, DWC Managing Partner Keith Clark wrote in an article on choosing a TPA published on the Benefit News website

"If I am hiring an attorney or any professional service firm," Clark wrote, "I want to hire the provider who best meets my service criteria. My buying questions will be focused on their experience and service model. If I like the answer, I will then ask about their fees."

Excerpts from the Benefit News Article

  • Plan sponsors will often choose a third-party administrator (TPA) based on recommendations from an influencer such as an investment advisor or consulting firm. Many TPAs report that the only question many potential clients ask is "what are your fees?"
  • A standard, repeatable approach to due diligence is required when reviewing services and fees associated with a contract. 
  • Revenue sharing must be disclosed, but it is easy for TPAs to leverage revenue sharing as a way of charging no or low fees as part of their fee schedule. TPAs may rely on revenue sharing to cover a majority of their revenue. If a buyer is focused on the fee schedule, they may select the TPA with the lowest fee schedule, but that may in fact be the firm that receives the highest revenue.
  • Read the full article about due diligence in choosing a TPA.

 

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Topics: News, Fee Disclosure, Fees, Fiduciary Duties and Due Diligence

The views expressed in this blog are those of the authors and do not necessarily represent the views of any other person or organization. All content is provided for informational purposes only and is not intended to be tax or legal advice.