In the complex world of corporate legalities, we often encounter challenges where the urgency to address significant issues can be misaligned with the gravity of the situation. One such scenario is frequently experienced by plan sponsors, caught in quagmires where they have to grapple with third-party administrators (TPA) who either have not completed necessary tasks, or refuse to turn over the work, resulting in compliance issues for the plan.
There are numerous instances where plan sponsors have to contend with a TPA that hasn’t performed the required duties or is not providing the necessary documents for keeping the plan in compliance. With no immediate remedy for this situation, it’s falling to the plan sponsors to bear the brunt of the responsibility. Their professional duty and legal responsibility towards their role can often lead to thankless tasks, having to solve significant issues with little or no sense of urgency from other parties involved in correcting the mistakes.
This situation highlights the critical role of due diligence in choosing a TPA, but also points to a larger issue within the industry. The duty of rectifying mistakes and maintaining compliance ultimately falls back onto the plan sponsors, creating extra burdens and hardships that can detract from their core responsibilities. It raises the question of what systems and measures can be put in place to hold TPAs more accountable for ensuring their duties are effectively carried out.
Being proactive is one solution. Plan sponsors could draft backup plans or escalation procedures to engage when these situations occur. They also need to adhere to all legal obligations, such as preserving documentation and ensuring that all aspects of the process are above board. Further education and awareness around the issue can also cultivate a more proactive approach.
In the end, the responsibility may lie heavily on plan sponsors, but with the right planning, legal support and a level of proactiveness, these situations can be managed more effectively. Discussing these problems openly and a willingness to tackle them head-on will be critical steps towards addressing this significant challenge for many plan sponsors.
For more insights and details on this issue, see the report by Ary Rosenbaum with The Rosenbaum Law Firm P.C. here.