Third-party administrator (TPA)
A third-party administrator (TPA) is a contracted firm that performs benefit plan administration, such as claims processing, but does not insure the plan.
A carrier underwrites coverage and carries the financial risk of claims. A third-party administrator performs administration for a fee and carries none of that risk. For self-funded medical plans, it often replaces the carrier in the operational role, while you carry the financial risk. Each party in a benefits chain holds part of the record. Knowing which party holds the authoritative record saves the round of phone calls that usually follows a coverage dispute.
What do you still own?
Delegating administration does not delegate your decisions. The administrator performs defined services under a contract, which sets scope, data exchange, service levels, and the correction process. A deduction file sent late produces an account funded late. Confirm what the administrator performs and what remains your task before the first plan year, not during the first exception.
- Plan design
- Eligibility rules
- Contribution strategy
- Choosing and monitoring vendors
- Fiduciary duties under the plan documents and federal law
- Accurate, on-time payroll data to the administrator
- Claims processing
- Continuation coverage
- Flexible spending and health savings account services
- Retirement plan recordkeeping
- The eligibility file, for self-funded medical plans
- Meeting Your Fiduciary Responsibilities
- Understanding Your Fiduciary Responsibilities Under A Group Health Plan
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.