My practice as an ERISA attorney is devoted to working with financial advisers to help their retirement plan clients reduce their administrative cost, minimize their fiduciary liability, and maximize retirement savings at a flat fee.

This dedication is as a result of my first-hand experience at seeing the underbelly of the retirement plan industry when I served as the Director of ERISA Legal Services for a third-party administration firm. I left that position in 2007 because I believed that fee disclosure was the future of the retirement plan business and that we were not going to adjust. My experience has shaped my practice and can help me give guidance on what pitfalls to avoid when working with a TPA.

Don't put your eggs in one basket: Use Multiple TPAs. I am surprised that a financial adviser would only use one TPA, regardless of cost, plan size, or plan type. Each TPA serves a different niche in the retirement plan business. A one-person TPA that administers non-daily value plans isn't the same TPA to hire for a $100 million daily valued 401(k) plan.

A financial adviser should work with several TPAs and pick the TPA that is the right fit for the client based on the type of plan and asset size. In addition, it's not wise for an adviser to place all their retirement clients with one TPA, especially if they get dissatisfied with their fees and/or competency of service.

Avoid the enemy within: The producing TPA. The TPA that I worked for was a producing TPA, which meant that it had a subsidiary that was a registered investment advisory firm. Most of our clients were clients of our RIA business; some were brought in by other advisers.

What advisers should realize is that a producing TPA is the competition and sometimes the competition plays unfairly. While most producing TPAs won't poach your client, why take the risk? Why let the fox guard the henhouse? There are so many TPAs that aren't producing TPAs, so why refer business to a competitor rather than to someone who is not in your business?

Read the client services agreements. Even with fee disclosure right around the corner, the retirement plan industry is still cloaked with fees and fee agreements that are difficult to understand. My old TPA was a master of the hidden fee because they pocketed revenue sharing. In addition, they failed to disclose that they would charge a termination fee and what it would be.

When it comes to TPA client agreements, the easier to read, the less the likelihood that fees are being hidden or the client is overcharged for something that you don't understand.

So if you see any fees that are not related to a minimum charge, per participant charge, or a basis point charge (if the TPA gets compensated for administration, based on assets), contact an ERISA attorney to review. Also, if there is no charge listed for when the TPA is terminated as part of a plan conversion, ask. The best way to avoid hidden charges is to ask the right questions.

Use an independent ERISA attorney. I can attest that I was a very good ERISA attorney for that TPA. After I left, I was replaced by two attorneys and a paralegal. However, as an ERISA attorney, I had no attorney-client relationship with my clients there because the TPA wasn't a law firm. Therefore, I had no duty of care that the needs of the client come first. If an error was caused by an administrator or processor at the TPA (which unfortunately happened more than you think) on a client's plan, I wasn't required to tell them. My duty was with my employer to ensure that our clients remain our clients by drafting plan documents and correcting errors that we caused or a prior TPA caused.

An independent ERISA attorney is an important resource. Make sure they have a background in single employer retirement plans, are provider-neutral, able to discuss difficult retirement plan concepts in English, and won't charge you for simple questions. Picking a TPA doesn't have to be like shooting craps - ask the right questions. By taking a common sense approach to picking the TPA that is right for the clients' needs, you can help grow your business instead of putting out fires caused by a TPA.

Rosenbaum is an ERISA/retirement plan attorney for his firm, The Rosenbaum Law Firm P.C., in Garden City, N.Y. Reach him at

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access