September 27, 2018

TIPS for TPAs: TPA Issues in DOL Investigations of Client Plans

By Fred Reish and Heather B. Abrigo


A Message to Third-Party Administrators

This is the second in a new series of articles that Heather Abrigo and I are writing for Third-Party Administrators (TPAs). The first article, “TPAs as Fiduciaries . . . of Their Own Plans,” can be found here.

This article discusses an important issue related to DOL investigations: what does your errors-and-omissions (E&O) policy say and could you inadvertently lose coverage?

We hope this information is helpful.

Fred Reish


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.

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.

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