Recordkeeper for Plan without Assets

[Guest L]

I am seeking recommendations for a Service Provider for a large (2,000 + participants) 401(k) Plan. Sponsor requires standard services (daily valuation, customer service representatives, interactive voice response and fully transactional internet capability).

There would be $0 to manage in assets - everything is in separate accounts.

Recognizing there will be recordkeeping fees,do you have any suggestions?

[Jon Chambers]

By separate accounts, do you mean brokerage accounts? If so, where are the brokerage accounts? This could be a problematic scenario. I'd love to help, but need more info.

[Guest L]

The plan has individual brokerage accounts and it also has separate accounts.

A separate account is a private account set up specifically for one individual or one group; in this case it is set up for the Plan. An investment manager is paid a fee to manage the account. Fees are generally structured for a separate account as if it were a mutual fund, i.e. as a percent of assets.

[Jon Chambers]

OK, I understand what you mean by "separate accounts". I usually use the term "separately managed accounts", or "private accounts", to differentiate from insurance company separate accounts. And it's useful to know that the plan has both these accounts and brokerage accounts.

With a separately managed account, to get daily valuation, someone must unitize the account (i.e., convert participant interest in the pooled account into a synthetic share that will fluctuate in value daily). Most managers don't unitize their own accounts. This can be costly. I've seen $10,000/year/account quoted for this service.

In terms of a recordkeeper recommendation, for this size plan I'd suggest contacting Milliman & Robertson. I'm familiar with their Dallas and Seattle offices, both of which could provide the functionality you are looking for. Other M&R offices probably have similar functionality, and may be closer to you.

Assuming that you have brokerage accounts at multiple broker/dealers, other prospective providers might include United Missouri Bank (UMB) and City National.

Finally, at the risk of sounding self serving (this is one of our primary services), you may want to consider engaging a consultant to help with the search. Not only would they identify appropriate providers, but they can help differentiate between proposals, assess the quality of each vendor and help negotiate fees.