Survey Finds TPA Revenue Sharing Disclosures, Audits Lacking

September 1, 2000 ( - Mid-market plan sponsors might want to take a closer look at their third-party service providers based on a new survey.

The Survey of Third Party Retirement Administrators by McHenry Consulting reveals that revenue sharing arrangements are generally (69%) not disclosed to customers on a regular basis, and just 16% obtain a SAS-70 audit of their recordkeeping systems and procedures.

A majority of the 275 respondents (52%) do not support company stock administration.

A full 25% of the respondents draw more than 80% of their business from daily valued defined contribution plans. Roughly a third (32%) use an outside service provider or partner to offer this service.

To better compete with bundled provider offerings, the TPA respondents now offered the following services:

  • 18% – Employee Education
  • 14% – Internet Access
  • 12% – Online Account Lookup
  • 11% – Online Transactions
  • 11% – Toll-free Access to Call Center
  • 10% – Interactive Voice Response
  • 5%s – Online Investment Advice

Trend Lines

  • NSCC Mutual Fund Trading had a positive impact on 44% of the respondents’ business, but 49% registered a neutral impact.
  • A positive impact from a consolidated “super” statement was reported by 47%, with 44% indicating no impact.
  • Self-directed brokerage accounts registered a positive impact for nearly 3/4 of the respondents (74%). Schwab was identified by most as the broker of choice (30%), while Fidelity came in second at 19% and Merrill Lynch at 14%. “Other” was noted by 22%.

Respondent Demographics

Respondents tended to be smaller firms, with nearly half (44%) employing 10 or fewer employees. Those employing 10 to 49 workers comprised another 41% of the total.

Forty-one percent of the respondents used the Quantech software, 14% Datair, 9% Trustmark and 9% FDP. Just 1% used OmniPlan/Plus, a mainstay of larger recordkeepers.

Nearly a quarter (24%) are considering a change in that software vendor over the next 18 months, with another 23% “somewhat likely” to do so.