Third-party administrators (TPA) for employee benefit plans provide valuable services that can lower administrative costs for a school district; however, occasional newspaper articles about the misapplication of funds by a few TPAs highlight how important it is to sufficiently vet TPA vendors before signing a contract. TPAs are subject to minimal regulation or oversight in the course of administering millions of dollars of funds on behalf of many Texas schools districts. Things to look for or consider before signing a contract include:
Should your school district consider contracting with an independent consultant that has expertise in TPA best practices and generally accepted TPA technical performance standards to assist the district in vetting interested TPA vendors?
Is the TPA registered with the Texas Department of Insurance (if not exempted from TPA registration requirements in the Texas Insurance Code)? See http://www.tdi.texas.gov/licensing/company/agtpa1.html
Does the TPA have proof of liability insurance and a fidelity bond?
Has the TPA disclosed commissions for referrals to any related entity?
Does the contract provide school district officials or their agent access to claim files to verify TPA payments to vendors are appropriate?
Does the TPA use in-house attorneys to defend adjudicated claims and how does the hourly fee compare to independent law firms?
Does the TPA’s office location help ensure the firm is familiar with local providers of covered benefits?
Does the TPA have capacity to add the school district’s workload?
Does the TPA have a clean Statement on Standards for Attestation Engagements (SSAE) No. 16 report, also simply known as a SSAE 16 report?
Has the school district consulted with an attorney to review the proposed TPA contract?