NOTE: This checklist describes the principal provisions which should appear in a TPA services agreement. Under each heading, we provide a brief description of the key points, but the actual agreement would contain additional detail and elaboration.

I. ENGAGEMENT

This section confirms that the TPA has been hired to perform services. We generally recommend that the plan be the "client." The plan sponsor should also sign the agreement to confirm that it is obligated by the terms of the agreement as well.

II. SERVICES AND FEES

This section should describe the services to be performed by the TPA, including some or all of the items listed below. These can be listed in attached appendices if more convenient. The fees for each service should be stated as a fixed amount, an hourly charge, a per participant charge, a per transaction charge or otherwise. Related expenses should also be described. This is often done by way of an attached fee schedule. Consider whether to reserve the right to change the schedule from time to time.

A. Plan takeover review -- if the plan is an existing plan previously administered by someone else, the TPA should specify what steps it will perform in the "takeover" and its duties (and compensation), if any, for reviewing the work of the prior TPA.

B. New plan installation -- this section would discuss preparation of plan and trust documents and their submission to the IRS, if appropriate.

C. Annual administration -- the agreement should be drafted with reference to DOL regulations identifying the activities which are ministerial and will not make the TPA a "functional" fiduciary. Make sure to indicate whether the TPA will prepare Forms 1099R, 945 and the like in connection with distributions.

D. Timeliness of data -- specify due dates by which the plan must provide data in order for the TPA to perform its functions on a timely basis.

E. Plan termination and submission to IRS and PBGC (if appropriate) -- list the services to be performed.

F. General consulting -- indicate the areas in which the TPA will be available to provide consulting services and the additional costs.

This section should specify what the plan and the employer are expected to do to enable the TPA to perform its duties, including the following, and indicate that the TPA has no responsibility for the performance of these items:

A. Timeliness and accuracy of data -- indicate when data must be provided and whether the TPA will perform any verification or is authorized to rely on the data provided without any cross-checking or verification.

B. Filing government reports -- the client should agree that it is responsible for the timely filing of governmental reports received from the TPA and for the accuracy of the contents (subject only to clerical errors which may occur in the preparation of the report).

C. Participant distributions -- the client should agree to be responsible for informing the TPA when distributions are to be made, including determinations for hardship withdrawals and for obtaining execution of appropriate documentation, such as distribution forms, loan documents and the like, when provided by the TPA.

D. Distribution tax forms and income tax withholding -- the agreement should specify whether the client of the TPA is responsible for these items.

E. Other plans and companies -- the agreement should specify that the client is responsible for informing the TPA of other plans and any other entities which are in a controlled or affiliated service group, entities which may be subsequently acquired and any change in form of the client (such as from C corporation to S corporation or from corporation to LLC).

This section should indicate what the TPA is not responsible for:

A. Investment services -- if appropriate the agreement should indicate that the TPA does not perform investment advisory services.

B. Fiduciary activities -- the agreement should specify that the TPA is not a fiduciary and is not the Plan Administrator, as defined in ERISA, and has no discretion to interpret the plan, determine eligibility or participation or take any other action with respect to the plan.

C. Accounting and legal services.

A. Statements, late charges, stopping of work -- this section should describe the TPA's billing practices, whether it will assess a late charge and the circumstances under which it will stop work if not paid. Note that late charges are governed by state laws and generally must be specified in the agreement to be collected. They may also be subject to state usury limitations.

B. Costs and Expenses -- this section should specify what out-of-pocket costs the TPA will be entitled to collect, including costs related to copying files to deliver to a successor TPA and costs of appearing as a witness in proceedings which may involve the plan.

C. Arbitration -- consider whether the parties will agree to arbitrate disputes. If you include an arbitration clause, note that they are governed by state law, and there may be specific legal requirements about the disclosures. In our experience, errors and omissions insurance carriers typically favor these provisions; however, this provision should be coordinated with your insurance carrier.

D. Ownership of files -- specify who is considered to be the owner of the files held by the TPA.

E. Collection costs and attorneys' fees -- state law may require that the agreement contain a specific provision in order to obtain attorneys' fees and collection costs if the TPA is forced to sue for collection of its fees. Consider whether this provision is appropriate. If the TPA has errors and omissions insurance, coordinate with your insurance carrier before including this provision.

This section should provide for indemnification of the TPA by the client for claims and losses arising out of suits in which the TPA is named as a party, but has no fault.

VII. TERM OF AGREEMENT

This section should indicate how long the agreement lasts -- i.e., whether it is a one year agreement, whether it automatically renews, and what notice must be given by the parties to terminate the agreement. Generally speaking, the agreement should be terminable by either party on reasonable notice (60 days is typical).

VIII. ACCEPTANCE

The agreement should provide for a place for the plan and plan sponsor to sign.