Is your plan’s third party administrator (TPA) outsourcing any of your plan administration services to India? You may never know the answer to this question unless you ask. You just may want to do that based on recent conversations at employee benefit conferences. Lots of TPAs are purchasing a variety of services from India-located outsourcing firms. Here is a word-for-word mailing to a firm that was recently shared with us.
“Hello If you have been thinking for long to reduce cost while working on Retirement Plan, Cafeteria Plans, etc and never got a chance to meet somebody like us, now is the chance to meet us in US.
We have been assisting TPA’s in Retirement Plan Accounting & Administration services for the last several years through India via Outsourcing.
Our CEO Mr. (Name withheld), popularly known as (Name withheld) is available in California to address all your concern and share the magic outsourcing mantra along with other strategic avenues which outsourcing can open up for your organization through alliance with us.
If you so desire, meet and take a strategic leap for your organization.
Please revert back to us at the earliest in order to fix in a convenient date and time to have a meeting with you in the US.”
The focus of such mailings is to replace the services provided by a TPA’s current employees at 50% to 70% of their existing costs. It is an enticing pitch. We have spoken at professional meetings to a number of TPA firms using these services, and most have been satisfied with the level of services received. However, almost all have commented that the terms of the initial arrangement have changed with increases in fees and other contract obligations from the U.S. TPAs to the outsourcing firms in India. We haven’t been able to determine if that pressure is a result of the drop in value of the dollar or a maturing of the market for these outsourcing services. Almost all of the TPA firms that we have spoken to regarding their outsourcing have invested significant time and other resources in training the outsourcing firm’s staff to meet the needs of the TPA’s internal processing requirements.
Finally, the website of one such outsourcing firm confirms a new strategy by these firms. Several of the offshore outsourcing firms have recently entered the full-service 401(k) marketplace and are marketing their services directly to employers that sponsor 401(k) plans.