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Self-directed conversions

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I'm not sure if I have a question or am just musing; here goes...

When converting a self-directed plan we have several options:

  1. Cash conversion.  Everything in the old platform is liquidated, and participants make new investment elections and their money is invested according to those elections.  I think this is best from the participants' standpoint, since they get to pick what they want.
  2. Mapping.  Everything is liquidated and mapped to "like" funds.  This seems to be preferred, and I guess is "ok" from the participants' standpoint, since they are more-or-less getting what they elected, even if it may have been some time ago, and even if "like" may be stretching it.  We're working on one now and it's interesting that the receiving platform doesn't want, and is more or less insisting, upon not having an enrollment meeting until after the conversion, basically to streamline everything.  Participants will be notified and can change investments in the sending platform, before the conversion, so they'll have that opportunity, but I think it's kind of a crappy way to handle it; I mean, it puts all of the burden on the participants to get things lined up ahead of time when they haven't even had a re-enrollment meeting.
  3. Target date conversion.  Everything goes into TD funds unless participants choose otherwise.  My hangup here is that if you have the enrollment meeting before the conversion, and if someone elects something other than the TD default, then someone is supposed to identify that and change that election manually.  Definitely not good for the "someone" who has to manually check all that.  It seems like a mistake to have an enrollment meeting first because it creates that burden.  OTOH, going back to #2, I think it kind of sucks for the participants because they're not given any choice in the matter, and then have to actively go in and change things if they want to. 

I guess the Q is, am I off-base, p*ssing into the wind on all of this, or...?  I guess the latter have become industry standards and I should just accept it.

Ed Snyder

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I have been out of the 4k world for 5 years now but I don't think I have seen or heard of #3 before.  I have seen plenty of #2.  In my mind if you don't like it you can change once the blackout lifts.  As long as that is kept to a minimum I am not so sure it is too bad.  I know my own money has been moved via a #2.  I have seen and did some #1 types back in the day. 

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Come to think of it, that realignment is done prior to the blackout (and, hence, the notice).  So, it would be incumbent on the participant to realigned (for instance) everything in cash and then perform a realignment of funds after the blackout.  I've been through a couple of these as a participant and do not recall a time where something was done with no opportunity to me to avoid it.

Good Luck!




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I have seen plenty of #1 and #2.  I see #3 more as a fall back when they don't get any new elections with #1.  They would basically move the cash over and default it into TD funds as the DIA.

I personally don't care for mapping  (#2), I prefer that the adviser put the work in and come up with the best and most appropriate lineup on the new platform rather than trying to squeeze the old platform into the new platform.  

Now throw in the twist of converting SDBAs and you can have even more "fun"...



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  • 3 years later...

IMHO #1 is the "highest" form of handling participant directed investments in a QRP. We all know that participants do not always make good investment decisions. Thus, it seems that using #2 is a way of perpetuating these bad investment decisions (i.e. inappropriate allocations). If you have the time and the resources, I think you provide a lot of value using method #1. I always viewed #2 as the "lazy way out."

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