Plan administrative service provider transition

[Guest Peggy Andrews]

My employer announced a transition from one service provider to another to begin March 1, 1998. The transition was to completed by the May/June time frame. At that time, 2/10/98, all fund management (transfers, distributions, loans) was suspended as part of a "quiet period". Our last statement from the previous administrator was for the period ending 2/28/98 (mailed in mid-May) and a letter was enclosed indicating we would get a statement in mid-July from the new plan administrator showing the opening balance as of March 1, 1998 and activity through June 30, 1998.

To-date, I have never seen such a statement from the new plan administrator. On June 26, 1998, we received a letter indicating the transition was taking longer than anticipated and that the "quiet period" would continue but should be live within the next 30 days. On 7/31/98, we received another letter indicating the same delay with a new predicted "go live" date of 8/31/98.

The new plan went "live" on 8/25/98.

All during this transition time, 2/10/98 through 8/25/98, I had no control over my money and at the same time, have no accounting of my money during the "quiet time". I have lost alot of money from that final previous plan statement and now (including contributions of 10% with a totally vested company match). After not receiving any accounting information from the new plan administrator, I called their on-line information service for my current balance.

Has there been errors/omissions in the handling of this transition process that someone should be held accountable for?

[Guest robin s vatalaro]

I don't of any specific cites to support this theory, but I believe as a plan participant you have a basic right to a full accounting of your funds. Each statement should flow to the next. Meaning any given statement should have a beginning balance that exactly ='s the ending balance from the immediately preceding statement. There should be no time period that you cannot account for. If I were in your situation I would pester the plan administrator until I received this information.

[KIP KRAUS]

Your perceived loss of money due to an inability to move money around clearly depends on your ability to time the market and may be difficult to argue with your employer. However, changing record keepers, which is what it souds like to me shouldn't inhibit the flow of employee contributions or company matching contributions. Therefore, I don't undestand your loss of these two items. No matter how your plan is set up, there shouldn't be a problem with contributions and matches.

Almost six months to switch record keepers could happen depending on the capabilities of both record keepers to transfer employee data smoothly. Three to four months could be expected. This transition is never a piece of cake.

Your loss of contributions and company match concerns me. I'm not sure this makes legal sinse, but then legalities are not always logical. Talk to your employer.

[Guest JB2]

The plan sponsor (your employer) and / or trustee have the right to change the investments and recordkeeping service. The transfer of plan assets can be a lengthy process depending on the method by which the information is provided (paper vs electronic) and the accuracy of the information. For instance, you cannot properly value accounts when the amount of dollars transferred is less than or more than the list of individual participant account balances received. This is very common when the participant recordkeeping is done by one administrator and the plan assets (and not the participant detail) valuation is done by another administrator.

The hard part of this change is when it becomes lengthy. Employers find it increasingly difficult to calm participants who are used to directing their investments, calling into a benefits phone and hearing their daily balance, and the ability to receive a loan. There has been much media coverage about employers running off with the plan assets and employees being left with nothing for retirement which only increases the participants concern.

The "loosing" money concept is a common misunderstanding. You may loose money if you directed the administrator to transfer funds to a new investment fund, and that did not happen in the stated time frame. Otherwise, the plan's asset valuation will change as frequently as they are valued (ie, daily, quarterly, etc.). Although you do not have the ability to direct how the assets will be invested, it does not mean that they are not currently receiving dividends / earnings. Ask the employer where the assets are currently be held during the transition period. My guess is that they are in a conservative type of investment (money market fund).

If your employer provides you with an annual statement, they have statisfied the reporting requirement to the participants. The fact that you have received quarterly statements is more of an industry standard and is not a requirement. However, because you have not received a statement for 2 quarters, it would not hurt to make a written requrest for one to the employer.

As far as errors and ommissions are concerned, it is not anything that can be answered with just the information that is provided. You have to assume that the decision to move the assets was a prudent one on the part of your employer to provide a higher level of service / plan features than was currently being provided. This level of service could be anything from plan recordkeeping responsibilities which rest with your employer, to enhanced investment options, internet access, and other plan features for the participants to choose from. Again, ask you employer why the decision was made.

If you feel current salary deferral contributions are not being transferred to the trust in a timely manner (no later than the 15th business day in the month following the month that they are contributed), then that is a concern which you can immediately address with your employer as that is a violation of DOL regulations.