Ensuring a Clean Recordkeeper Conversion

There are steps retirement plan sponsors can take before converting to a new recordkeeper to minimize any “clean up” afterwards; however, there is always follow up to do.

Art by Melinda Beck


When converting from one retirement plan recordkeeper to another, having the right team in place and adequately preparing beforehand can minimize the amount of “clean up” to do afterwards.

Chad Parks, chief executive officer of Ubiquity Retirement + Savings in San Francisco, says it is a good idea for plan sponsor to conduct “a mini audit of the plan before the conversion. The sponsor needs to supply the new recordkeeper with all of the plan documents, including the financial statement, prior compliance testing and annual reports. This is a good time to ensure all of these are in compliance” with Department of Labor (DOL) and IRS requirements.

Ensuring data from the old service provider is accurate is also key, says Rick Irace, chief operating officer at Ascensus in Dresher, Pennsylvania. “The part that gets everything going and rolling is the census data,” Irace says. “That really is the most critical aspect, to ensure we have accurate, indicative information on participants—name, address, date of hire, etc.”

One of the most common glitches Irace has witnessed is with moving assets from the old recordkeeper to the new one. “Assets should be moved as efficiently as possible,” he says. “The quicker this can be done, the shorter the blackout period in which participants will not have access to their funds.”

Amy Ouellette, director of retirement services at Betterment for Business in New York, suggests, “See if there is a notice period required before assets can be moved out of funds. Some funds have a 12-month put or other contractual timeline requiring advanced notice before moving out of them.”

A plan sponsor’s experience

PolyQuest of Wilmington, North Carolina, switched from unbundled recordkeeping services from American Funds, along with a third-party administrator, to MassMutual in January 2017, says Kim Mueller, human resources manager at the manufacturer of resin products and the 2018 Plan Sponsor of the Year winner in the corporate 401(K) < $10 Million category. PolyQuest relied on a Merrill Lynch adviser from a sister company to oversee the process.

“They were a big help for us in handling the contracts, setting a timeline and creating a checklist of all of the things we needed to think about when switching over,” Mueller says. Certainly, one of the most critical aspects to the process is “mapping the funds, making sure the new recordkeeper had equivalent options and that this was communicated to the participants.”

As well, PolyQuest’s new recordkeeper, MassMutual, assigned a very competent conversion team, Mueller says. “The adviser and MassMutual handled communication with the old recordkeeper and third-party administrator, making sure [MassMutual] got all of the legal documentation needed, such as adoption agreements and transfer notices,” she says.

MassMutual assigns three key people to handle a conversion, says Ella Bevilacqua, director of client management at the firm, headquartered in Enfield, Connecticut. This includes a transition manager, a plan design consultant and a technical consultant.

“The transition manager keeps the sponsor up-to-date with a detailed timeline and conducts weekly calls with the plan sponsor to ensure they are aware of all of the moving parts and who is handling day-to-day activities,” she says. “The plan design consultant reviews current plan documents and does a deep dive into these documents to ensure all of the pieces that need to be recordkept are being done so correctly. They may suggest enhancements or updates.”

Finally, the “technical consultant helps with the data transfer,” she says. “They coordinate all of the data coming from the prior carrier to ensure it is mapped to our system accurately. They discuss with the sponsor any data that needs clarification and then do a deep-dive training with the plan sponsor to ensure they are comfortable with our website and know where to find information.”

After the conversion

Because ensuring that data is accurate is one of the most important functions of a recordkeeper conversion, “the plan sponsor needs to verify that the data is correct on the new recordkeeper’s system,” says Terry Dunne, senior vice president and managing director of retirement plan services at Millennium Trust in Oak Brook, Illinois. “Tests should be run to check for errors [in participant census data].”

Likewise, vesting and beneficiary data should be checked to make sure it is accurate, Ouellette says.

Bevilacqua says she has witnessed new recordkeepers finding during conversions that there are discrepancies between the plan document and how a plan was actually administered while with the prior recordkeeper. Depending on what the discrepancy involved, the plan sponsor may have to go through a Voluntary Correction Program (VCP) filing with the IRS.

Yet another area in which MassMutual has seen mistakes is participant loans. Sometimes, plan sponsors fail to monitor them as closely as they should have. “Participants may have missed payments or are behind schedule, so it may be necessary to refinance them or seek out additional payments,” Bevilacqua says.

And, after assets are moved to the new recordkeeper, it is very important to ensure that account balances match, both in total and for each participant, Parks says.

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