Third Party Administrators Key Terms

Become aware of the key terms related to third part administration

By Ann Starr

Third party administrators are a type of human resources consultant that provides outsourced services for processing claims from an insurance company when a business has chosen not to do so within the organization. Usually the services can be provided more economically. This is a highly complex function that most businesses may not have the infrastructure or resources to do themselves. By purchasing these services, the business can expect that any liabilities will be reduced because the consultant is responsible for staying up-to-date on federal and state regulations related to this function.

401(k)

A 401(k) plan is a retirement plan that is designed to help employees prepare for retirement by allowing them to save some of their earnings while postponing income taxes. In this plan, the employee is permitted to have some of their wages "deferred," and set aside in a 401(k) account. Third party administrators are invaluable in helping companies manage these plans.
Try: There are many rules related to these types of plans. For a comprehensive guide to them check out Job-Employment-Guide.

Defined contribution plan

A defined contribution plan is legally defined as a plan that provides an account for every participant and is based exclusively on the amounts the individual contributes with income, gains, losses and expenses being added or subtracted according to the performance of the plan's various elements. Third party administrators keep up-to-date on the various types of investments and plans that are allowed by regulation.
Try: For a more detailed explanation of a defined contribution plan see StreetAuthority.

Unbundled plan

An unbundled plan or cafeteria plan is a service model offered by third party administrators that is usually custom designed to allow businesses to pick and chose which services they want or need in employee benefit plans.
Try: Pensions specialists has a good description of the various services unbundled plans offer.

Annuity products

An annuity is an insurance contract in which a life insurance company (most typically) makes payments in the future to a buyer or annuitant in return for a lump sum payment or a series of regular payments before the onset of the annuity. The payments to the annuitant are based on the lifespan of the individual and are one way to provide income during retirement.
Try: For a list of the various elements of a type of plan referred to as a variable annuity, see Vangard Group.

Exchange-traded fund

An exchange-traded fund or ETF, is a term known by third party administrators as a type of investment that is traded on the stock market similar to stocks.
Try: This is a complicated subject; a more detailed definition of ETFs can be found at InvestorWords.com.

Assets under management

Assets under management or administration is a term used by financial services companies and is the value of all the assets that an investment management, mutual fund or money management fund administers and manages for its customers. Third party administrators are typically the manager of the portfolio of the assets in these types of funds.
Try: A more "plain English" definition of assets under management can be found at Investopedia.