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Watch that you don’t get overpaid

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I don’t believe in coincidence and when something happens twice, it’s a cause for concern. Within the past couple of months, I’ve had to deal with third party administrators (TPAs) paying ERISA §3(38) fiduciaries in excess of their contracted fee.

 

Advisors who are fiduciaries need to understand that getting paid in excess of their fee isn’t found money, it’s money that needs to be turned over back to the plan. It’s no time for a shopping spree because as a plan fiduciary, it’s a prohibited transaction to take a fee in excess of the contracted amount and as a fiduciary, you can’t use plan assets to to your benefit. Sure, the TPA messed up, but it’s your job to turn the money over as soon as possible.

 

As a fiduciary for a plan, I was paid double my fee one quarter and I held that excess in escrow until the TPA discovered the error. You need to watch those quarterly payments to see anything that’s different from the norm.

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