Recordkeeper conversion

[401kAllTheWay]

I tried looking for answers on this and haven’t found one that gives the plan sponsor view of what it is like to change recordkeepers. We are knee deep in converting our plan and the hurdles keep coming to us. We seems to take one step forward but then 15 steps backward each day. 
 

Any advise or previous experience in converting? This is a massive change in a very condensed timeframe and very small team. 

[Paul I]

Here is a good overview from an ASPPA presentation https://www.asppa.org/sites/asppa.org/files/PDFs/Conferences/LAPC/2016 Outlines/WS15 - Establishing timelines.pdf

Most conversions follow very similar steps, but nuances of how a plan was run with the current provider and how the new provider expects to provide the corresponding services can leave you caught between the two.

There are conversion consultants who will sit on your side of the table and go through the conversion process with you.  The consultant call BS when appropriate, explain to you any issues and how they typically are resolved, and alert you if there is a legitimate issue that needs to be addressed to complete the conversion.  The service usually is provided based on a rate per hour and while it may seem a little pricey, you probably understand now why it is well worth it.

[jsample]

An issue that always comes up is what do you do with participant deferrals that are withheld during the transition?  For example, the new recordkeeper is not set-up to accept contributions, the old recordkeeper will no longer accept contributions, where do you put the deferrals taken during this period?  No one wants to set-up a one month account to accept contributions, outside of the employer's accounts, but do not know of another solution.

[Bill Presson]

6 minutes ago, jsample said:

An issue that always comes up is what do you do with participant deferrals that are withheld during the transition?  For example, the new recordkeeper is not set-up to accept contributions, the old recordkeeper will no longer accept contributions, where do you put the deferrals taken during this period?  No one wants to set-up a one month account to accept contributions, outside of the employer's accounts, but do not know of another solution.

Frankly, the solution is at the beginning of the process and not start until the new RK is ready.

[Paul I]

@Bill Presson is correct that addressing the transition for sending payrolls to the new recordkeeper is among the very first topics to discuss among the old recordkeeper, new recordkeeper and payroll, and having a work plan agreed to by all parties before the blackout notices go out can eliminate a lot of anxiety. 

It is worth noting up front that, while not ideal, by default the fallback if the work plan does not work out is having to deal with some late payroll deposits.  Having a work plan demonstrates a good-faith effort was made and if stuff happens to derail the work plan, everyone needs to focus on the big picture of completing the transition as accurately and as timely as possible.

So what should be in the work plan?  At a very high level:

The old recordkeeper will need some time to prepare the participant demographic and plan accounting conversion records.  The records for this process will be available after the old recordkeeper completes the processing the last payroll for which they are responsible for investing.

The new recordkeeper will need some time to have in place sufficient information to accept payroll records and process any activities associated with payroll records.  This may include calculating a match or posting principal and interest amounts for loan repayments.  Minimally, the new recordkeeper needs an employee identifier (ID or SSN), and name, but almost certainly will gather additional information.

The new recordkeeper also will need to have investment elections in place.  This will involve a detailed discussion of setting up the investment menu and working out process of mapping old fund elections to new fund elections, or completing an investment re-enrollment (with a default fund).  A plan to address dividend and interest received during the blackout also should be discussed.

Payroll will need to make any adjustments to synchronize the payroll data interface with the specifications needed by the new recordkeeper.

All processes and file formats should be fully tested before starting kicking off the conversion.

The client needs to be prepared to fill in potential gaps in the records for circumstances such as when a participant terminates employment during the conversion.

Everyone should be prepared to provide a complete, 100% to the penny reconciliation of all funds leaving the old recordkeeper, funds received by the new recordkeeper and any payrolls processed during the blackout period.

The fastest conversion we have done for a plan with more than 100 participants - measured from the old recordkeeper generating data files to the new recordkeeper going live - was 2 hours.  More realistically, the typical conversion takes 3 to 7 business days.  The overall conversion planning and execution takes 10-12 weeks.

Done right, this is a lot of work and the client should be prepared to pay for it.  Done right, participants will start out with a feeling of confidence in the plan and the new recordkeeper.