The Need for Alternative Fund Administration
You may ask, 'Why can't the funds do the process themselves?' They commonly do not have the time, capacity, or platform to deal with the everyday methods themselves. To compensate for this, companies usually outsource their money management processes to companies that specialize in this area.
Numerous compliances, due diligence, and structural requirements need to be met to be able to meet the legal fund manager standards. While not trivial, these criteria can mean the difference between a thriving company and one that can go crazy for the SEC.
How much does a Third-Party Administrator cost?
TPAs typically have difficulty predicting product costs and prices. All TPAs have different pricing systems available for different services, with different prices for services shared between multiple affiliates and services outsourced to professionals. This makes it easier to purchase appropriate TPA services, such as by comparing apples and oranges. Savings from cheaper TPAs can quickly disappear with false refunds, while the most expensive TPAs may not guarantee the highest quality or be the best solution for your business. Many of HRA's TPAs require that each employee's annual allowance be pre-deposited into an account. This is a large upfront payment, and managers often invest these funds and recoup the interest themselves.
Before engaging a TPA, your organization should:
-
a) Get the contact information for customer referrals.
-
b) Receive a summary of TPA approval status within one or more states where the health care plan is operational.
-
c) Both service providers can offer support for self-funded plans. However, there are differences between the two.
-
d) TPA can operate independently of health insurers, allowing greater flexibility for plan structures and health network providers
-
e) ASOs are typically subsidiaries of health insurance companies and may limit the company's provider network options to those allowed by the insurance company.
While TPAs and ASOs can perform similar functions, having some TPAs managed independently by ASOs as subsidiaries of health insurance companies can result in differences in plan network options. With TPA services, businesses often have access to more health insurance options, as well as funding and reimbursement options.
Hiring an outside fund manager may not be the right choice for all Private Equity managers, but more and more managers recognize the value they bring. A fund manager's extensive experience, access to world-class technology, and robust management environment make recruitment an easy choice.