Archived Insight | February 1, 2020
The process of procuring defined contribution (DC) plan services is a significant undertaking that may result in a plan sponsor selecting a new recordkeeper as a means to improving service, cost-effectiveness or both. Although DC plan services have become more standardized over the years, the process of moving from one recordkeeper to another is complex. Risks associated with a conversion include the potential for unexpected disruption to participant accounts, lengthy blackout periods, lost data, costly reconciliations and misunderstood communications.
In our experience, it is important to consider the key areas that will drive success before undertaking a service transition:
Every recordkeeper transition must have a project plan, an experienced team and a participant communications campaign. These core components are described briefly below.
As alluded to above, the transition plan is critically important. Generally, the incoming service provider, in consultation with the plan sponsor, prepares the transition plan. A thorough transition plan will:
We recommend an in-person kick-off meeting that covers the following:
Because the incoming service provider is the primary driver for the transition process, at a minimum its team should include:
For a large plan’s transition, these core team members will lead various sub-teams. The DC plan sponsor should expect to meet, either in person or via conference calls, all of the team leaders and many members of the full team.
The DC plan sponsor needs to appoint at least one day-to-day administrative contact who will be designated as the plan’s “go-to” person. The responsibilities of that person or people are noted in the box below.
As the implementation process nears completion, the plan sponsor can expect to see new additions to the team. For example, field services may be covered initially by a home office or regional person. Later, that person might be supplemented by a local representative.
A DC plan recordkeeper transition requires a total team effort. The team must be flexible and fluid enough to address unexpected obstacles.
The outgoing service provider should provide a de-conversion specialist to aid in the successful transition. Typically, a de-conversion specialist focuses on “transitions out” and provides the central source of contact for all of the data, test files and plan documentation that the new recordkeeper will need. As you might expect, the outgoing recordkeeper will not be happy about losing your plan to a competitor. Do not expect them to drop everything to respond to “rush” requests for data files and other reports or information. This is why Segal recommends the use of the timeline and ongoing calls with all parties.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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