A third-party administrator (TPA) performs several administrative services on your behalf. While a typical plan consultant helps you with designing some kind of plan for your employees, TPAs help with the design, launch, and ongoing management of such plans. An actuarial consultant, for instance, analyzes statistics, makes predictions, and offers accurate information to help his clients evaluate their best options.
They will help you to make informed decisions, optimize performance, and ensure compliance to meet your business objectives while focusing on important issues such as liability risk management, fiduciary responsibility, and de-risking. However, each business has its own unique set of requirements. So, your chosen actuarial consultant should design a plan based on your specific objectives and business goals.
The importance of actuarial TPAs has been growing rapidly over the years because of their wide range of benefits. Here are five such benefits that make them crucial for your business:
1. Calculate Accurate Plan Contributions
If you hire an actuarial consulting firm, they will design the best pension plan for your company and calculate accurate contributions required to fund that plan. As an employer, you are allowed some flexibility when deciding how much to contribute to the plan. Your actuarial TPS will structure the plan document while considering employee demographics in such a way that annual contributions will meet your specific objectives.
2. Increase Your Savings
TPAs are known to offer the most competitive deals when they create a plan for your employees. TPAs usually have thousands of employees under contract (from different companies). So, they can provide a better deal with an insurance carrier against a broker/advisor that has a far less significant number with a specific carrier. They also offer several other cost-efficient services like identifying reimbursement opportunities that your business is eligible for.
3. Protect Yourself from Frauds
When administering the specifically designed plans for your company, TPAs can also keep a check on any employee compensation frauds. Such frauds are a $30 billion problem annually in the United States. In the State of California alone, they cost nearly $1 billion to $3 billion every year. If you have an experienced TPA to identify the potentially fraudulent claims, you can save a significant amount of time, money, and effort.
4. Ensure Compliance
Another benefit of TPAs is that they ensure ongoing monitoring of regulations, laws, and court decisions for the legally compliant management of the designed plans. If there are any issues or risks, they provide necessary solutions to maintain compliance.
5. Minimize Costs Related to Injuries
Injuries at work happen mostly due to negligence. Such injuries cost nearly $53.9 billion in wage and productivity in 2019 in the United States. TPAs bear the responsibility of educating your employees about the best safety practices. They even help with developing a safety program that can reduce the number of claims made each year.
Businesses are becoming more complex, and the potential financial repercussions can cause significant damage. Actuarial TPAs help in minimizing risk and financial exposure while simplifying, managing, and administering important functions on your behalf.