Most businesses provide benefits packages to their employees, but deciding how to manage them can be tricky. Although some businesses do manage these benefits themselves, they’re often complicated and time-consuming. Ultimately, contracting a third-party administrator with specialized knowledge about health care and retirement or savings plans might be a better option.
A third-party administrator (TPA) is a company that manages certain aspects of a business’ employee benefits package. Many companies outsource this function to save time and money.
TPAs are usually independent businesses, but sometimes they are also associated with certain insurance carriers.
Outsourcing this function is quite popular among small business owners as it frees them from the worry of insurance and benefits packages. Third-party administrators are also highly skilled and knowledgeable in their respective fields and can provide great value to a business.
What exactly do TPA's manage?
If you haven’t outsourced this before, it can be a little scary to make such a long-term decision that concerns money. How do you know the service is worth the price? Although many offer good advice, it’s hard to know if they will really deliver.
Hiring a TPA to manage your employee benefits program has many advantages.
Managing the portfolios of employees can be time-consuming and at times it can also get complicated. By allowing someone to handle the entire process, you can concentrate on your business.
When looking at all the work that goes into managing a benefits package, you can see how hiring a TPA might be highly cost-effective.
One thing to keep in mind is that a TPA may not always have your company’s best interests in mind. They are their own entity and have their own goals and philosophy. At times you may have conflicting philosophies as to how something should be done.
One way to negate this situation is to hire a fiduciary TPA. This type of TPA is required by law to only make recommendations that are beneficial to their clients. As of April 2017, a new Department of Labor rule considers TPAs that give advice to 401(k) and IRA participants to be fiduciaries.
There are many types of TPAs, so it’s important to research your options before choosing one. Also remember that different types of TPAs can create greater flexibility – if you are unhappy with your first choice, you can always move to another.
Despite the potential conflict of interest, TPA benefits usually outweigh the cons. If you have many employees, managing their benefits in-house can create unnecessary burdens and confusion. TPAs exist to help businesses manage this aspect and make sure employee benefits packages are implemented smoothly while also providing helpful information to each employee.
At the end of the day, it’s a small price to avoid all the hassle that goes into managing benefits packages for yourself and your employees. If you have any questions or need further information, please get in touch with us by clicking the link below.