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Sluggish economy yet to slow third-party administrators

Third-party administrators in the state for employee benefits such as insurance and retirement plans aren’t experiencing any major declines in business linked to the slowdown in the economy, and some are even reporting that business is up.

“This is the best year we have ever had,” said David White, president, Morgan White Group, Jackson. “Our TPA (third-party administrator) doesn’t do self-funded medical health insurance and that might be affected more. We have a supplemental medical product. When rates go up, this product is used to help rates come down. Our products are sort of contrarian. When rates go up, our product is more popular.”

White can’t remember what the firm experienced in the last national economic slowdown because it has been so long ago. But as far as the current downturn, there hasn’t yet been a major impact.

“Benefits might be more popular if you can’t give a raise,” White said. “If you can’t give a raise, perhaps adding a vision or dental plan helps keep people happy. I think people are looking at costs harder, and normally when that happens people do some adjusting in benefits. They may raise deductibles and co pays. However, at this point I’m not seeing it yet. Employers are trying to continue giving the same benefits as long as they can.”

GranthamPoole CPA in Jackson also isn’t seeing a slowdown in its TPA business.

“We deal with primarily with small and medium-sized companies,” said Michael P. Denny, CPA, CFP, a partner with GranthamPoole CPA. “Being in Jackson, that makes up most of our businesses. We don’t have a lot of huge businesses around here. From my perspective the small and medium-sized businesses seem to be doing okay. And we have seen continued growth in our third-party administration business. The third-party administration we do is typically for 401(k) and retirement plans, and I haven’t seen any significant cutbacks on what people are contributing.”

The firm isn’t affected by how much people decide to contribute to their plans because administration of the plan has to take place whether contributions are up or down.

“We still have to do regulatory filings, and test the plan to make sure it is in compliance with all the IRS rules and regulations,” Denny said. “Our work has to be done regardless of what the stock market does and what people are putting in. It is like filing a tax return. You have to file no matter how much money you make. From the third-party administrator perspective, we still have to do the work regardless of how the economy is doing. The only way the economy would start to affect the third party-administrator workload is if it got to the place people shut down their 401(k) plans and we had less plans. But the likelihood of that happening is very slim.”

Mississippi may be somewhat insulated from the downturn in real estate markets because the state, including the Jackson area, didn’t see the big boom in real estate values that in some areas of the country was following by a steep decline.

“The clients I have seem to be doing really well and haven’t been impacted by the so-called economic slowdown,” Denny said. “It seems fairly well contained at this point.”

TPAs are a good choice for many businesses because they take the headaches out of keeping up with ever-changing government rules and regulations. Denny said it seems like every year there is a new law or act that affects the plans. That is why specialists are needed.

“The laws are constantly being updated,” he said. “We have to keep up with that, and that is what we are here for. I guess to summarize it, we are seeing more and more of a need for the services that we provide to clients who want to stay in compliance with all these changing rules. Business seems to be pretty good. It is growing for us.”

Mark Canterbury, president, PBCI, Ridgeland, which has been in business 22 years, also reports no slowdown linked to the economy.

“I just see folks are not making changes like they used to,” Canterbury said. “They are sticking with current programs. They are a lot more skeptical and not as open to new ideas. It seems our business has gone into neutral, not so much a slowdown or advance. I’m talking about health insurance, supplemental insurance, 401(k) plans — the whole nine yards.”

Canterbury said the biggest problem for firms like his are what he refers to as “the Wal-Mart syndrome.”

“Large companies are going out and gobbling up what business we have,” Canterbury said. “They use scare tactics like saying they can provide free attorneys if any lawsuits are filed. That is hurting small guys in insurance business more than anything else. The big unpredictable in our business is the Wal-Mart syndrome. The big guys are getting all the business and the little guys are having to fight for scraps.”

A bank that has purchased an insurance firm might, for example, suggest to someone who has a loan with them that they do business with the bank’s insurance company. There might be a perception that the ability to maintain a good banking relationship is tied to also buying insurance from the insurance subsidiary of the bank.

As for free attorneys, Canterbury is skeptical.

“I can’t find one person who had an attorney who came in during a bad situations and didn’t charge a nickel,” he said. “Something needs to be said about the tactics being used out there. I recently lost two accounts I had for 13 years. People said, ‘We’re sorry, you’ve always done good job for us, but we have to give our business to so and so because we were told to do it.’ That kind of stuff is killing us. It doesn’t matter if you do a good job anymore. You can still lose your business.”

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.


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