Publication:      NIPA “Strictly Business” Newsletter

Volume/Issue:  April 2017

 Strictly Legal:  The Triage

Ilene H. Ferenczy, Esq.

Great TPAs have an amazingly broad spectrum of knowledge and talents.  TPAs are required to be well organized, personable, and highly attentive to detail.  They also must understand the law surrounding employee benefits and how plans operate, making them quasi-lawyers and quasi-tax accountants.  TPAs need to understand investments enough to account for them, making them quasi-investment experts.  And, it’s always good if the TPA has a bit of the salesman, so that s/he can market more services.  In short, TPAs have a very difficult job, and often do it with very few accolades, as outside people commonly don’t appreciate the tightrope that their TPA walks.

Because of the need for this jigsaw puzzle of talents, it is hard for TPA firms to find good employees.  This is more than an HR problem. If it is a given that a lot of people in this business are not necessarily the superheroes that we would prefer to hire, we need to deal with the reality of our staffs’ strengths and weaknesses.  A huge element of having to adjust for staff that rarely meets your highest aspirations is how to risk-manage the process.  If members of your staff are unable to perform certain tasks or have personality traits that prevent or inhibit the level of attention to detail, you need to make sure that this does not lead to a malpractice claim against the firm.

One aspect of this issue commonly arises in the following way:  A client calls her administrator with a technical question.  The administrator does not know the answer.  It is very likely that the first process that occurs is for the various staff members to discuss the problem to see if anyone has any useful and relevant experience or technical knowledge.  While this is a wonderful, collaborative process and solves many a problem, it also can be a case of the blind leading the blind, commonly without anyone involved realizing the depth of risk they are undertaking.  Furthermore, this informal exchange of ideas is rarely documented, so that later investigation as to how that client was given that advice may not be available.

While this method commonly comes up with correct answers, it is usually undertaken outside of the view of the business owner.  The risk that the group has come up with a wrong answer is borne by the business, but the owner has not been a part of the decision as to whether the question should be elevated to someone more knowledgeable.  In fact, perhaps no one knows that this process has occurred or that it has caused a problem until the situation turns ugly, either because of a government audit or a participant claim.

A TPA owner cannot afford the risk of uninformed decisions being made, however innocently and well-intentioned, by staff.  A staff person, on the other hand, needs to be in a position to keep the client’s ball rolling without endangering his or her job.

A solution may be to help the staff triage their process.  “Triage” means to evaluate a situation and assign a level of urgency to it.  Watchers of medical TV shows have seen this process unfold: the emergency room staff questions whether it can put this guy in the waiting room and get to him in order of appearance, get a doctor to see him right away, or prepare an operating room NOW.

In a TPA shop, a triage process helps both staff and management know if the issue can be addressed at the level where the problem first came to light, or if it needs to be elevated to someone with more know-how.

Here’s how it works.  The business owner, with the help of technical gurus, makes a list of the issues that engender risk, either because the area is highly technical or the owner knows it’s outside the staff’s ken.  Examples include controlled and affiliated service groups, weird plan investments, distribution taxation, tax deduction issues, and self-employed owner compensation.  The next step of the triage is to identify three categories in each of these issues (it could be more, but three seems reasonable):  solutions the staff administrator should know; more challenging issues that the managing administrator should handle; and complex problems that need to be elevated to either the firm’s technical guru or outside counsel.

These triage levels are then memorialized in writing, and the information is given to the TPA staff.  This has several benefits. First, a proper triage will advise staff administrators of implications that they otherwise may not have known exist.  For example, will a staff TPA know when s/he is asked by a client, “Can I invest plan money in a limited partnership?” that such an investment may produce unrelated business income or prohibited transactions?  But, if the triage on investments says that the TPA must elevate any questions about partnerships and real estate to a higher level, the TPA knows not to just look up permissible investments in the plan document.

Second, a proper triage ensures that both the owner and the staff person know what expertise an employee is expected to have about a topic. This helps the owner to properly allocate staff education dollars.

Finally, the last part of the triage will involve making sure that everyone documents the problem-solving process. Therefore, if a lawsuit arises, this prudent process is a matter of record, and demonstrates that the TPA behaved prudently.

Triaging can be of great benefit to a firm in the areas of risk management and employee comfort and education.  Give it a go!