Third Party Administrator (TPA) definition
Third-party administrators (TPA) are organisations that handle administrative duties for certain employee benefits, typically insurance. Businesses outsource to TPAs when they don’t want to retain in-house responsibility for these administrative duties.
With regard to insurance, TPAs are typically retained by organisations that self-insure their employees i.e. they retain a pot of cash to cover any claims rather than pay premiums to an insurer. TPAs are particularly common in the health-care industry where the administration of claims can be complex.
TPAs serve an entirely administrative function and have no legal or financial responsibility. The risk of loss remains with the employer.