Employers who have made the commitment to offer retirement or health insurance plans to employees have been regulated by ERISA (Employment Retirement Income Security Act) since 1974.

The employers who decide to accept the responsibility of administering and managing ERISA plans must be very careful as they do so according to regulation and guidelines set forth by the Department of Labor. One of the most important responsibilities is to point out their plan's need for services and then to select an experienced and competent professional to help the plan fiduciaries in performing their duties according to ERISA regulations and guidelines. Using the most appropriate criteria to ascertain the right Third-Party Administrator (TPA) will go a very long way in making certain that the plan is run in a smooth and cost-effective manner.

Selecting an inexperienced and even mildly incompetent TPA for your ERISA plan could result in

negative consequences when plaintiffs bring actions alleging violations and seek maximum penalties.

Selection Process

Every employer offering retirement and health insurance plans should consider taking the time necessary to select the most appropriate TPA for their ERISA benefit plan. Developing a well-planned selection process can be time-consuming and can take away from focusing on the day-to-day demands of administering the plan and addressing the needs of the participants. Taking the current litigious environment into consideration and using due diligence in the selection of your plan's TPA will satisfy your duties under ERISA and also minimize your risk of litigation.

Over time, the Department of Labor has revealed that the TPA selection process should depend on the facts and circumstances associated with each plan, but should also consider the TPA's qualifications, the historical quality of services, and the sensibleness of its fees. Some of the most important factors to consider are:

·Qualifications - When considering any TPA, it's important to drill down and consider the available services being offered, experience dealing with ERISA plans, fees, and expenses, and most importantly, client references. Not taking the necessary steps to properly evaluate your TPA, could, according to the DOL, constitute a breach of fiduciary responsibility.

·Data Security - Safeguarding your employee's data in the current data environment should be near or at the top of the list of considerations. Request a documented safety protocol regarding data security.

·Conflicts of Interest - The employer's consideration process should require a thorough review of affiliations between the plan fiduciaries, sponsor, and service provider.

·TPA Comparison Shopping - Although the employer is not responsible for selecting a TPA with the lowest fees and expenses, the employer should shop the marketplace to find the most qualified TPA at the most competitive rates.

·Bond Verification - When a TPA is charged with handling plan assets, the TPA should have a bond in place to protect the plan against potential losses due to fraud or dishonest acts. ERISA requires that every person involved with plan assets be sufficiently bonded.

·Monitoring - Employers should request regular updates and monitoring from the TPA so that comments or complaints from participants can be addressed. Participants should receive regular updates from the TPA about the plan and how it could affect them and ensure that performance issues are properly addressed.

Utilizing a competent and experienced third party administrator to assist with your benefit and retirement program will go a very long way to assure you are in compliance with ERISA regulations and are keeping employee benefits managed properly. If you have questions about selecting a third party administrator, or for ERISA compliance contact Skyline Risk Management, Inc. at (718) 267-6600 to discuss your concerns.