Managed Benefits · Explained
A third-party administrator, or TPA, is an outside firm that runs the operations of your employee benefit plans: enrollment, COBRA, account-based benefits, claims, and compliance filings. You stay the employer, your plans stay yours, and your broker stays your broker.
Your monthly estimate on screen - no call required
Where The Term Comes From
The clearest way to understand a third-party administrator is to start with self-funding. In a fully insured plan, an insurance carrier accepts the risk, sets the premium, and pays claims out of its own reserves. In a self-funded plan, the employer accepts the risk instead: claims are paid from the company's own funds, and the employer chooses how the plan is designed. What the employer usually does not want to do is process claims, chase eligibility data, and mail COBRA notices in-house. That gap is exactly what a TPA fills. It is an independent firm, not a carrier and not an insurer, that administers a self-funded or employer-chosen plan on the employer's behalf. The employer keeps the risk and the decisions; the TPA runs the machinery. Some employers extend the term to administration on top of fully insured plans too, which is where the category has widened over the last decade and where BEG operates.
The Lane Markers
| Task | In a TPA's lane? | Who owns it otherwise |
|---|---|---|
| Open enrollment and life events | Yes, core work | Your HR team, if nobody outsources it |
| COBRA and state continuation notices | Yes, deadline-driven core work | The employer, with statutory penalties for misses |
| FSA, HSA, and HRA account administration | Yes, the classic TPA specialty | A bank or software your team reconciles |
| Claims processing for self-funded plans | Yes, where TPAs originally came from | A carrier, under fully insured plans |
| ACA tracking and Forms 1094-C and 1095-C | Yes, when scoped into the service | Your payroll or HR team at filing season |
| Choosing carriers and negotiating renewals | Never, that is broker work | Your insurance broker |
| Selling or placing insurance coverage | Never, a TPA is not a broker or carrier | Your broker and the carriers |
| Employing your workforce | Never, your employer status never moves | You, always, unlike a PEO arrangement |
Sources: U.S. Department of Labor, COBRA continuation coverage · IRS, ACA information center for applicable large employers
The Full Picture
Third-party administrator means exactly what it says: a party other than you and the insurance carrier that administers your benefit plans. The term was born in self-funded health coverage, where an employer pays claims from its own money and hires a TPA to process them. Over time the category widened into everything operational: enrollment, eligibility data, COBRA notices, FSA and HSA accounts, and compliance filings. The one constant across every version is legal structure. Your company remains the employer and the plan sponsor, and the TPA acts in your name, under your plans, on your data. Nothing about ownership changes; only the workload moves.
The most common confusion in this category is between administration and advice. Your broker helps you choose plans, negotiates with carriers at renewal, and places the coverage. A TPA does none of that; it runs the machinery behind whatever plans you and your broker chose. That is why the roles coexist so well: the broker was never staffed to chase enrollment data and COBRA deadlines, and the administrator has no business steering your carrier decisions. If a vendor pitching administration starts talking about replacing your broker or moving your coverage, it has left the TPA lane and you should ask what it is actually selling.
A PEO bundles benefits inside co-employment: it becomes the employer of record for tax and benefits purposes and moves your people onto master plans it sponsors. A TPA changes none of that. Your employees stay yours, your plans stay yours, and ending the relationship is a vendor swap rather than a corporate unwind. The full comparison lives at TPA vs PEO, and the HR-side cousin of this distinction is covered in ASO vs PEO. The short version: if anyone becomes your employees' employer but you, it is not administration anymore.
Benefits administration is not hard because any single task is hard. It is hard because the tasks are deadline-driven, statutory, and invisible until missed. Federal COBRA requires specific notices on specific timelines, per the Department of Labor's COBRA rules, and state continuation rules add another layer on top in states with their own mini-COBRA statutes, covered in COBRA vs mini-COBRA. ACA reporting puts Forms 1094-C and 1095-C on the calendar every year for applicable large employers, per the IRS ALE information center. A TPA industrializes that calendar. Whether that is worth paying for is a workload question, worked through in software vs services.
The Job Description
Runs open enrollment and life-event changes, keeps eligibility data synced between the employer, the carrier, and the plan.
On self-funded plans, adjudicates and pays claims from employer funds. On fully insured plans, coordinates claims questions between employees and the carrier.
Sends federally required notices on federally required timelines, and tracks the state continuation rules that extend beyond COBRA where they apply.
Tracks offer-of-coverage data all year and prepares the annual filings applicable large employers owe the IRS.
Gives the employer and the broker visibility into enrollment counts, claims trends where applicable, and compliance status without anyone chasing a spreadsheet.
Answers the enrollment, eligibility, and COBRA questions employees would otherwise route to an already-stretched HR team.
Four Roles, Four Jobs
| Role | What it does | Who employs your people | Takes on insurance risk |
|---|---|---|---|
| TPA | Administers the plan: enrollment, claims or carrier coordination, COBRA, ACA filings | You, always | No |
| Insurance carrier | Underwrites risk, sets premiums, pays claims on fully insured plans | You, always | Yes, on fully insured business |
| Insurance broker | Advises on plan design, shops and places coverage, negotiates renewals | You, always | No |
| PEO | Co-employs your workforce and moves people onto master plans it sponsors | Shared, via co-employment | No, but bundles a fully insured carrier plan |
A broker and a TPA are almost always both present and both necessary. A PEO replaces the employer relationship itself, which is the one thing a TPA never touches. BEG is not a PEO; see TPA vs PEO for the full breakdown.
The Real Numbers
Most TPAs price per employee per month, sometimes blended with a flat account fee, and most gate the actual number behind a discovery call. That makes it hard to compare against the obvious alternative: hiring an internal benefits administrator. A single dedicated hire for that role typically costs a company $60,000 to $100,000 a year in salary and overhead alone, before any enrollment software, and before the COBRA and ACA compliance risk that sits on that one person's shoulders. A missed COBRA notice carries a federal excise tax exposure of up to $110 per day per qualified beneficiary under IRS rules, which is the kind of cost a per-employee TPA fee is priced to prevent. A per-employee-per-month model scales with headcount instead of fixed salary, which is usually the more predictable line item as a company grows.
Vendor Selection
Per employee per month, flat account fee, or blended. If a vendor will not put a number in writing, budget extra time to get one.
These are the deadline-driven, statutory pieces. Ask how notices are tracked against DOL timelines and how 1094-C and 1095-C data is gathered all year, not assembled in January.
A TPA that cannot cleanly hand eligibility and claims data to your broker at renewal creates more work than it removes.
If a vendor pitching administration starts talking about co-employment or moving your plan onto its own master policy, it has become a PEO conversation, not a TPA one.
Sources: U.S. Department of Labor, COBRA continuation coverage · IRS, ACA information center for applicable large employers
Do You Need One
This is exactly what classic TPAs were built for. You want professional claims and account administration, and you should scope it with your broker in the room.
You need the administration side of the TPA idea: enrollment, life events, data, COBRA, and ACA filings handled for you while the broker keeps the strategy. That is the BEG model.
Then you may not need a TPA yet. Software your team runs may be enough. Revisit the question the first year open enrollment costs you weeks or a notice slips.
Where BEG Fits
BEG Managed Benefits, powered by isolved, is the administration side of everything on this page: enrollment, life events, COBRA support, ACA tracking and forms, and a dedicated team on the top plan. You keep your broker, you stay the employer, and where most of the TPA category hides pricing behind demos, BEG shows a monthly estimate on screen in about 90 seconds. Plan details and scope live on the Managed Benefits overview.
Your monthly estimate on screen - no call required
Questions
A third-party administrator, or TPA, is an outside firm hired to run the day-to-day operations of an employer-sponsored benefit plan, most often a self-funded plan, without becoming the insurer, the employer, or the plan owner.
No. A TPA does not underwrite risk or hold an insurance license to sell coverage. It processes claims and administers the plan on behalf of the employer, who is usually the one paying the claims out of its own funds under a self-funded arrangement.
No. Your broker advises on plan design and places coverage with carriers. A TPA runs the operations behind those plans: enrollment, claims, compliance. The two roles are complementary, and most companies keep both.
No. A PEO co-employs your workforce and moves your people onto plans it sponsors. A TPA administers the plans you already own while your employer status never changes. See the full comparison in TPA vs PEO.
Enrollment and eligibility management, claims processing or carrier coordination, COBRA and state continuation notices, ACA reporting including Forms 1094-C and 1095-C, plan reporting for the employer, and direct support for employee questions.
When the operational load outgrows the people carrying it: open enrollment eats weeks, COBRA notices slip, ACA forms become a fire drill, a self-funded plan needs professional claims processing, or the company is weighing a TPA against hiring an internal benefits administrator.
Most TPAs price per employee per month, and most gate that number behind a sales call. As a reference point, a single internal benefits administrator hire typically runs $60,000 to $100,000 a year in salary and overhead, before any software costs, while a per-employee TPA fee scales with headcount instead. BEG Managed Benefits shows an instant on-screen estimate rather than requiring a call.
Check the fee structure and whether it is disclosed up front, confirm the TPA has federal COBRA and ACA reporting expertise per DOL and IRS rules, ask how claims and eligibility data flow to your broker and carrier, and confirm employer status and plan ownership stay with you, not the vendor.
Ready?
Answer a few questions, get your exact number in about 90 seconds. No call required, no commitment.
Your monthly estimate on screen - no call required
