In Practice
Providers Vie for TPA Attention
Particularly in the small-plan market, retirement plan providers are seeing more business come through third-party administrators (TPAs)—and, as a result, are ramping up their efforts to attract TPAs.
Reported by Ellie Behling
Providers are also beefing up their technology. ING upgraded its TPA Web site with automated reporting capabilities, streamlined loan and distribution processing, and a reporting tool that allows TPAs to run customized reports on any plan in their books. The Principal announced enhancements to its TPA Edge program, including online TPA reporting capabilities and automated services. Transamerica is launching Webinars that focus on specific topic areas to help TPAs build out their market strategies.
Why all the new enhancements? Providers say they are doing more and more business through TPAs, particularly in the smaller end of the market, where TPAs have always been crucial. To expand their business with TPAs, providers are seeking to pass on more efficiencies and financial incentives to reduce the TPA’s expenses.
“This is just a natural series of enhancements that we need to do to keep up with the rate of business that we’ve doing,” said Jeff Schreiber, vice president of business development in the TPA market at The Principal. He noted an increasing percentage of The Principal’s business is moving toward an unbundled service model. “If you look at the market trends—and the market trends are based on the needs of plan sponsors and advisers—there’s no doubt that working with third-party administrators is becoming a preference, and an increasing preference.”
In the $5 million and under market, Principal does about 45% of its proposal activity through TPAs, and “that percentage goes up every year,” Schreiber said. “We see that as a trend that will just continue.” While the smaller end of the market is defined by TPAs, Schreiber doesn’t necessarily see the trend stopping at small plans, as the TPA provides a localized feel that is becoming an increasing consumer preference. “If the plan sponsor likes that local feel…there is no reason to stop at any industry-defined ceilings.” TPAs and providers can offer the “best of both worlds” by providing the technology participants want paired with the plan design expertise and “local hand-holding” of a TPA, he said.
Similarly, Transamerica does 40% to 50% of its business in the less than $5 million market through TPAs, said Deb Rubin, vice president and head of TPA Channel Development at Transamerica Retirement Services. “Our TPA sales have more than doubled in the last two years and we are very hopeful that that trend will continue,” she said. While Transamerica hasn’t announced any specific financial incentives, Rubin said the firm is focusing on value-added programming to expand their reach in the TPA community. Furthermore, like other providers, Transamerica is making strategic hires of people with backgrounds in the TPA market. “Supporting the TPA community is a very important part of our sales book, and our sales strategy,” she said.
Dennis Mosticchio, senior vice president of Group Retirement Solutions at Guardian Life Insurance Company said the firm’s recent enhancements are the first of a number of initiatives in order to improve relationships with TPAs. He said they are evaluating all aspects of their current TPA program as part of the company’s overall initiative to focus on the small-business market. Dale Magner, vice president, Retirement Sales, said that in the last two years they’ve built their wholesaling networking around the country using a TPA-centric model for distribution. “Obviously our goal is to sell more business and as a result we want to have deeper and better relationships with TPAs, so we become their referral of choice to their financial advisers.”
Ginger Brennan, head of National Intermediary Business Development at ING, said ING has focused on TPA relationships for a while, and plans to deepen and grow those relationships in 2010. “We’ve had long-standing, deep relationships with TPAs for decades,” she said “It’s not a new thing for us…Honestly, some of the other vendors are coming to the forefront and saying ‘now we’re going to start courting TPAs.’”
The ease of technology will tend to drive which provider the TPA uses, Brennan said. “TPAs will tend to do business with the vendors that pay attention to them.”