Litigation Involving TPA & ERISA

Employee Retirement Income Security Act plans are sometimes administered by third-party administrators.

The Employee Retirement Income Security Act (ERISA) is a federal law that sets standards for private employee pension and retirement plans, as well as other employee benefit programs. It protects employee retirement accounts in the private sector. Third-party administrators (TPAs) play a large role in the function of private retirement plans.

ERISA Generally

ERISA requires private industry retirement and pension programs to provide certain information to employees on a periodic basis, such as plan features and notification of changes. It also sets fiduciary standards to ensure responsible investment of retirement funds, as well as a hearings and appeals process for disputes.

TPAs and ERISA

Sometimes, employers will outsource management of retirement and pension plans to a third-party administrator. TPA entities must comply with ERISA in the same way an employer would. However, employers should be aware of the ERISA compliance procedures a TPA undertakes. Each TPA should have an Statement on Auditing Standards (SAS) 70 audit report which details the TPA's compliance protocol.

Typical Litigation

When a TPA or employer breaches the fiduciary duties that require responsible and trustworthy handling of retirement money, employees in the plan have a cause of action against the TPA and the employer. ERISA litigation is often in the form of a class action, for example when very large employers or TPAs are involved, and judgments can be in the millions of dollars.

References

• U.S. Department of Labor: ERISA
• Morgan Lewis: ERISA litigation
• NDB Accountants and Consultants: Fiduciary Responsibilities for Your ERISA Compliance Plan