It’s always unpleasant when a TPA gets a call or a letter from the Department of Labor (DOL) about an investigation of a client’s qualified plan.
What should a TPA do?
As a first step, a TPA should notify its client about the inquiry from the DOL, so that the client can, if desired, relay that information to its attorney.
If the client objects to the TPA giving information to the DOL, the TPA should tell the client to have its attorney contact the DOL with the objection. Then, the TPA can advise the DOL that the client has objected and the client’s attorney will be contacting the DOL. However, if the DOL issues a subpoena, a TPA will be required to allow the DOL to review its files.
We also suggest that a TPA review its files to identify any problems in the plan’s administration. If the TPA spots a problem for which it could arguably be responsible, the TPA should contact its attorney to evaluate the issue and develop a strategy for responding.
In addition, the attorney should review the TPA’s E&O policy to see what could cause loss of coverage. For example, many E&O policies require notification to the insuror of potential liability, but differ on when the TPA is required to provide notice (e.g., discovery of the problem or the assertion of a claim).
Lastly, some E&O policies contain provisions that say that an admission of fault or wrongdoing results in the loss of coverage.
The moral of the story?
When the DOL makes contact with a TPA during the investigation of a client’s plan, the TPA and its staff should understand the issues in responding or failing to respond. If, during the course of an investigation, an issue arises that suggests potential liability for the TPA, the TPA should immediately consult with its lawyer for assistance with the response and to avoid possible loss of E&O coverage.
Heather Bader is a Partner in the Employee Benefits & Executive Compensation Practice Group of Drinker Biddle & Reath. Heather's practice focuses on assisting public and private sector plan sponsors, third party administrators and other pension service providers in all aspects of employee benefit, including qualified retirement plan and health and welfare issues. Heather assists and counsels them in complying with their fiduciary duties under ERISA, the Internal Revenue Code and other federal laws. She also assists plan sponsors in connection with qualification of state domestic relations orders, Department of Labor and Internal Revenue Service audits, complying with fiduciary responsibilities, reporting and disclosure matters, and drafting qualified, non-qualified and welfare benefit plan documents.
Fred Reish is a nationally recognized ERISA attorney and one of the retirement industry’s most respected authorities on fiduciary standards and compliance. After a distinguished career as a longtime partner at Faegre Drinker, where he practiced in the benefits, executive compensation, and investment management groups, Reish joined Prime Capital Retirement as Director of Fiduciary and ERISA Practice.
Over the course of his career, Reish has advised plan sponsors, financial institutions, and fiduciaries on some of the most complex issues in the retirement plan landscape. Widely regarded for his deep technical knowledge, he has extensive experience in fiduciary governance, prohibited transactions, plan design, retirement income strategies, and representation before federal regulatory agencies. He has been a leading voice in the evolution of the 401(k) system since its inception.
At Prime Capital Retirement, Reish guides a fully integrated approach to plan-sponsor support, aligning fiduciary oversight, plan design, and participant financial wellness. A passionate educator and industry spokesperson, he is committed to advancing the fiduciary standard both legally and ethically, supporting advisors and plan sponsors through education, thought leadership, and innovative program development to help participants achieve lasting retirement security.