For retirement plan sponsors, implementing a change to defined contribution recordkeeping providers can lead to improved plan services, cost-savings or to both outcomes for the long-term benefit of participants. Depending on the circumstances, however, the process of moving from one service provider to another can be a complex, multi-faceted undertaking. Risks associated with the conversion can be effectively managed under a comprehensive transition plan as part of a DC plan’s overall approach to managing operational risk, according to Segal Consulting.
“DC plan recordkeeper transitions require care, commitment, cooperation among the parties and clear communications to participants,” said Wendy Carter, defined contribution director with Segal. “With thorough advance planning, effective documentation, diligent follow-through and quick action to correct course, as needed, a transition can be smooth and successful.”
Major action items involved in a transition include:
“A service provider transition may present unique challenges for each plan sponsor,” noted Julian Regan, senior vice president with Segal Marco Advisors, the investment solutions provider of The Segal Group. “Payroll processing complexities, data transmissions, and investment mapping processes present risks, but each can be managed effectively under a well-documented, mutually agreed-upon implementation framework.”
To speak further with a consultant on the risks of vendor management or other components of operational risk, please contact Todd Kohlhepp.
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