Timelines for Retirement Plans
Are you considering switching to a new plan advisor, third-party administrator, or recordkeeper for the new year? Is there enough time to do it by January 1? Well, it depends on which role you’re looking to replace. Let’s explore!
Changing Your Plan Advisor vs. Third-Party Administrator vs. Recordkeeper
How quickly can you change a retirement plan advisor? That’s easy to answer - pretty darn quickly, as it turns out. You’ll need to sign a new service contract, fill out paperwork with your recordkeeper to inform them of your new plan advisor, and you’ll need to break up with your old advisor (there’s sometimes a notice period there).
Changing your third-party administrator isn’t too difficult either – it’s basically the same process as above. You should consider when your compliance testing occurs and how much you’ve already paid for the administration since that may affect your timing.
It’s more difficult to change your recordkeeper. There is a lot more involved than just filling out some paperwork. Here is some guidance on the steps you need to take and what to plan for.
Pre-planning Stage: 2+ weeks
When people come to us and say that they’re in the market for a new recordkeeper, we work with them to develop a shopping list. For example, we ask them what about their current provider they are unhappy with, what they’re seeking in a new provider, etc. Then we start whittling down the list because there are many options for recordkeepers out there. (Remember, changing or negotiating some things with your current recordkeeper may be easier than shopping for a new one.)
The process is similar to repairing your current car vs. getting a new one. You may be able to fix what’s wrong with your current car and keep it on the road for a few more years. If so, great! If, on the other hand, it's time for a new car, you need to figure out what you want - SUV vs. sedan vs. coupe, type of GPS, exterior color, interior design, etc. before you set off to visit the dealerships or you’ll be overcome quickly by decision fatigue.
Armed with an appropriate shopping list, we get pricing and other information from the vendors and digest that information for our clients’ retirement plan committees so they can get a list of finalists they have confidence in. We will then invite the finalists to provide the committee with information on their products, how they do business, how they can solve the clients’ pain points, etc. This pre-planning stage is not something you can rush through.
Other things to consider during the pre-planning stage:
Get organized - Gather your plan documents and data together; this includes your summary plan description, trust agreement, participant data, and adoption agreement. Why? Your new recordkeeper will ask for it, for one thing, plus there may be some things the recordkeeping systems can’t handle. Having an inventory of what you require from a new recordkeeping system software is crucial.
Talk to your employees - Finding out what they need and want concerning their retirement plan is helpful during this stage.
Transition and Conversion Stage: 90+ days
Once you’ve decided on a new recordkeeper, you begin the process (and I do mean process) of moving the plan from your old recordkeeper to your new one. This stage is more complex than most people think it is. A common question we get is, “Why does this take longer than a couple of weeks?” There are several reasons for this:
Notifications - There are required notices that must be delivered to plan participants within certain timeframes (usually at least 30 days prior to taking an action)
Buildout - It takes time to convert the plan design from one document to the next, build out the plan on the recordkeeping system, and populate it with the plan data from the old system.
During the transition and conversion stage, you’ll finalize the contract with the new recordkeeper and establish the timeline for the transition. You’ll also notify your current recordkeeper to let them know you’re moving on to a new provider. At this point, your current recordkeeper sets the timeline, since they will be the one to determine when they can deconvert the plan and transfer the assets to the new recordkeeper. Everything relies on that transfer date, and recordkeepers often have constraints as to when they can do the transfer.
You’ll also have to do a plan document review, where you’ll take the current provisions that are in your plan and move them over to the new recordkeeper’s document. This is where it can get a little sticky, as there may be provisions that the new recordkeeper can’t support in the plan that must be modified. You may also want to make changes to your plan at this point.
During the period of data migration, there will be a blackout period; you are required to send employees notice of the blackout at least 30 days in advance. To that end, you’ll have to provide contact information for all of your employees to your new recordkeeper.
It’s important to keep the lines of communication with your employees open during the transition and conversion stage. They’ll want to know when they can access the new website, what’s happening with their money, whether they’ll have to fill out any new forms, etc. Once the blackout is lifted, and the rollout occurs, you’ll want to inform your employees of all the cool new features they can access on the website.
The transition and conversion stage takes some time, so if you’re embarking on changing your recordkeeper now and hoping to have it completed by January 1, well…you’re out of luck!
Factors That May Affect the Timeline
Asset transfer date - That’s the date when the actual asset transfer occurs between the current and new recordkeepers. As we mentioned above, there may be constraints as to when this can occur, plus you’ll need to notify your employees of the blackout period far enough in advance.
Plan size and complexity - If you have a lot of moving parts to your plan and a lot of different provisions to work through, the transition will take longer, and you want to be sure to give yourself plenty of time so you don’t run into trouble.
Data quality and accessibility - If your new recordkeeper has questions during the reconciliation process, that can delay the rollout stage. These issues usually come up at the last minute as the data transfers over.
Cooperation between the old and new recordkeepers - Cooperation between providers is essential for everything to go smoothly. Make sure they each have the other’s contact information so that they can work together as needed.
Plan design changes - Any significant changes to the plan will take extra time to review and implement, as will checking to ensure the new recordkeeper can support the existing and new provisions in the plan. Reviewing the plan document is extremely crucial, and will require assistance from everyone involved, including the plan advisor. If you bungle this step, you are likely to have problems down the road.
Technology and integration - It is imperative that your new recordkeeper link up to your existing payroll system, and that your HR systems can be on the correct timeline for the transition. You may have to wait for someone from the payroll company to help with the implementation, so allowing extra time to review that all the technology is running smoothly (and accurately) is highly recommended.
Tips for a Smooth Transition
Have a very hands-on plan advisor - A good plan advisor can effectively act as a project manager, plus they will most likely have access to all providers involved and can act as a go-between.
Start early - Having ample time to switch any type of provider (especially your recordkeeper) is essential. Keep in mind that you can switch your recordkeeper any time of the year. The only time you might hesitate is if your plan is audited and the ease of getting old records. Your plan advisor can help you decide on a good time to switch.
Make sure you and/or your team have enough bandwidth - If you’re the point person for the entire process, make sure you’ve scheduled time on your calendar. If you have a team that will be involved, make sure they also have enough time to handle the responsibilities of the transition along with their regular duties. That team should also include your advisor and/or their support staff.
Communicate clearly - It's important that your employees feel informed and comfortable throughout this transition. Remember, the change ultimately benefits them (and the plan sponsor). Clearly communicate any relevant deadlines and provide accessible resources for questions or concerns.
Document everything - Keep detailed records of all your communications (a good plan advisor can take this off your plate).
Get a good plan advisor - Switching providers is a big step; you need someone on your side who can hold your hand and guide you through the process (not to mention take care of some of the tasks). It will save you time and energy in the long run!
To summarize:
You can change your advisor at any time throughout the year, as well as your third-party administrator (although with your third-party administrator you need to be mindful of when your compliance testing happens, along with what you’ve already paid for administration-wise). Changing your recordkeeper will take at least three months (longer if you haven’t put together your shopping list yet).
If you’re considering switching to a new third-party administrator or recordkeeper and need some help, reach out to us - we’ve helped lots of plan sponsors navigate the process, and we can help you, too!