TPA Issues in DOL Investigations of Client Plans

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 errors and omissions (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.

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.

Fred Reish and Heather Abrigo are partners at Drinker Biddle & Reath LLP.

Published by permission.

Opinions expressed are those of the author, and do not necessarily reflect the views of ASPPA or its members.

This is Part II of a three-part series by Fred Reish and Heather Abrigo concerning risk management and compliance for third-party administrators (TPAs). Part I is available here.