Third-Party Administrator Bond
As a third-party administrator (TPA) handling employee benefit plans, it’s essential to comply with state laws and regulations. One of the requirements in some states is to obtain a third-party administrator bond. In this guide, we’ll give you everything you need to know to get the bond you need in a zip!
What is a third-party administrator bond?
A third-party administrator bond is required of applicants for insurance administrator licenses or certifications in certain states. These bonds provide financial protection to employee benefit plan participants (insureds and insurers) in the event of the TPA’s failure to fulfill their duties. The bond ensures the TPA will manage the plan according to state laws and regulations and act in good faith. In other words, it guarantees the TPA will handle other people’s money properly.
What is a third-party administrator?
A third-party administrator is a business entity that provides administrative services related to employee benefit plans – such as health insurance, life insurance, and retirement plans. TPAs handle tasks like enrollment, premium collections, and claim processing under contract to another company. TPAs do not offer insurance but rather manage plans on behalf of the plan sponsor.
Get Your Third-Party Administrator Bond:
Quick Takeaways
- A third-party administrator is a business entity that provides administrative services related to employee benefit plans.
- In some states, TPAs are required to obtain a third-party administrator bond as part of the licensing process.
- The bond protects insurers and insureds if the administrator commits fraud or behaves dishonestly.
- Bond amounts can range anywhere from $5,000 to $1,000,000.
Who needs a third-party administrator bond?
In some states, TPAs must obtain a third-party administrator bond as a licensing condition. The bond serves as a guarantee that the TPA will perform its duties according to state laws and regulations. It protects other parties if the administrator commits fraud or behaves dishonestly.
If you plan to operate a TPA in any of the following states, you may need to get bonded first:
- Arizona
- Georgia
- Arkansas
- Illinois
- Iowa
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- Idaho
- Hawaii
- Maine
- Missouri
- Maryland
- Nevada
- Louisiana
- New Hampshire
- Wyoming
- West Virginia
- South Carolina
- Oklahoma
Check with your state regulatory agency to determine if a bond is required in your specific case.
How much do third-party administrator bonds cost?
Bond amounts generally range anywhere from $5,000 to $1,000,000. To obtain your bond, you’ll pay a small percentage of the amount required in your state. Your bond rate (called a premium) will depend on several factors, including your financial history and creditworthiness. Typically, TPAs with a good credit history qualify for lower bond rates than those with poor credit.
Third-Party Administrator Bond Requirements by State
Each state has its own requirements for third-party administrator bonds. In general, TPAs must provide proof of their licensing and registration, financial statements, and other documentation as required by the state regulatory agency. Some states may also require TPAs to offer a letter of credit in addition to the surety bond.
Frequently Asked Questions
Can I get this bond with bad credit?
Even if a TPA has bad credit, it may still be able to obtain a third-party administrator bond by working with a surety bond company that specializes in providing bonds to high-risk applicants.
If you’re worried about your credit score, call ZipBonds to talk with an agent directly.
How do bond claims work?
If a claim is made against your third-party administrator bond, the surety company will investigate the claim and determine whether it’s valid. If it is, the surety company will pay out the bond amount to the plan participants or other affected parties up to the bond’s limit. You must then repay your surety for all costs covered on your behalf.
How does the surety bond application work?
TPAs must work with a licensed surety bond company to obtain a third-party administrator bond. The bond application process typically involves providing financial statements, proof of licensing and registration, and other documentation as required by the state regulatory agency. The surety company will evaluate the TPA’s financial history and creditworthiness to determine the bond rate. Once approved, the TPA must pay the bond premium to activate the bond.
Get a Third-Party Administrator Bond in Your State
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to get bonded in a flash!
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.