Third Party Administrator

A third party administrator is any person, company or institution that looks after the administration of an agreement between two or more parties. They are commonly found when there is a need for another level of monitoring between employers and employees in the area of employee benefit or pension plans. It’s not that each side does not trust the other, but having an independent voice that simply looks after everyone’s best interests usually prevents either side from abusing their rights, privileges, or obligations under the plan. Learn more here at www.bfbond.com.

In November 1996, a Working Group of the United States Department of Labor’s Employee Benefits Security Administration examined the role of an independent party as part of a global review of employee benefit and pension plans and concluded that independent third parties could enhance and improve the protection and performance of employee benefits plans. They particularly noted that these independent voices could exercise independence in decision making, add valuable expertise and experience, and provide checks and balances to ensure the accuracy and efficiency of these plans.

At the end of the day, the Working Group did not mandate that employee benefit and pension plans have a third party administrator, yet they did devote an entire section of their report to the value of independent third parties being involved in the administration of these plans. They also identified a number of ways in which these parties could improve and enhance the performance of employee benefit and pension plans. These included:

• enhanced expertise and independence
• curing and replacing trustees in breach
• providing safeguards and cross-checks to the flow of monies in and out of a plan
• providing cross-checks to ensure accuracy

The Working Group also heard from several witnesses who identified “best practices” being carried out by these independent administrators. They included:

• Reducing and spreading the plan’s fiduciary risk by structuring and monitoring a plan’s investment activities.
• Using a third party as the record keeper of the plans to prevent abuse and neglect by employers.
• Utilizing the third party to look after the day-to-day functions that affect the participant's account and allow for contribution participants to receive timely disclosure and confirmation.

All of these recommendations and observations have only confirmed what most experts have known all along, that an independent voice sitting at the employee benefit plan protects employees and employers and ensures the longevity and good health of the plan.  To learn more about incorporating a third party administrator into your organization, contact us at www.bfbond.com.

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