Circumstances arise where a Third-Party Administrator (TPA) is terminated from managing employee benefit plans. This action, sometimes contentious, stems from a range of performance and contractual issues. For example, consistent errors in claims processing, failure to adhere to service level agreements, or a breach of fiduciary duty can trigger the process of replacing a TPA.
The necessity of replacing a TPA is a critical decision, influencing the financial health and employee satisfaction of an organization. Historically, such changes were less frequent, but with increasing regulatory scrutiny and the demand for cost-effective administration, organizations are more vigilant in monitoring TPA performance. Benefits can include improved service quality, enhanced compliance, and potentially lower administrative costs through more efficient processes. Avoiding legal disputes by proactively changing TPA services is also a major benefit.
