What's a normal black-out period when converting a plan from one recor

[Guest JimJ]

What does the industry consider as a normal black-out period when converting a plan from one recordkeeper to another? How much would this change if the plan decided to sell all assets before making the move? What if the custodian was also changing? Thanks, JimJ

[Jon Chambers]

A typical black-out (by the way, I prefer the term "quiet period" runs about 4 weeks, +/- 2 weeks, so a 2-6 week transition period is common. Some vendors are now specializing in a no-black-out conversion. Most vendors would say that cash conversions are easier than in-kind, so a full liquidation doesn't save time, but not liquidating might take longer. And most conversions entail changing custodian, so again, I don't think that has an impact.

Is your question pertaining to just a recordkeeper change? If so, it may be system dependent. I've seen a transition between two recordkeepers, both using TrustMark and both custodying through Schwab, with no asset sale, take less than a week. But if the recordkeepers are using different systems, it probably would take just as long to change recordkeepers as to change everything.

[MR]

I think it depends on what you mean by a "blackout period". I think its reasonable for a participant to be unable to call and change his investments for a month or six weeks, but I don't think it is reasonable for a participant's money to be uninvested for this long. If coordinated properly, the time a plan assets are out of the market should be just a few days. It can be done by following these steps:

1- contact current custodian and tell them that as of a specified date, no further transactions will be processed on the account and the VRU should be turned off.

2- have the current provider prepare a valuation as of this specified date. Send the valuation to the NEW administrator. Note, it may be a few weeks between the date of the valuation and the date the statements are prepared, but the money is remaining invested.

3- the current provider "loads" the balances onto its sytem.

4- assuming all participants have completed enrollment forms and the new custodian is ready to receive the conversion dollars, you instruct the prior custodian to liquidate.

5- the prior custodian should be able to tell you within a day the balance liquidated from each fund. The new administrator merely needs to update the balances he has on his system for gains. Remember, the only activity in the account since the date of the last statement will be investment gains. The new administrator, if properly prepared, can complete the conversion balance calculation in a couple hours. The balances can be e-mailed and within another day or so, reinvested.

We've done dozens this way and it works great, but you need a broker who is not impatient. Their first instinct is to request a liquidation prematurely. If you request liquidation without having that last valuation, you are at the mercy of the prior administrator to provide the participant-level breakdown. Bad idea.

[Dave Baker]

See also

http://benefitslink.com/boards/index.php?showtopic=4970

http://benefitslink.com/boards/index.php?showtopic=7240

http://benefitslink.com/boards/index.php?showtopic=4733

http://benefitslink.com/boards/index.php?showtopic=1785

http://benefitslink.com/boards/index.php?showtopic=3821

http://benefitslink.com/boards/index.php?showtopic=5031

[Guest JimJ]

What would be a typical charge by the prior recordkeeper to provide the necessary files and do the required work?

[Jon Chambers]

There's no "typical" charge. It will depend on the complexity of the transition, size of the plan, need for custom programming for transfer data, etc. I've seen transition charges range from zero to tens of thousands of dollars.

I agree with MR that participants should not be out of the market for more than 2-3 days max, and typically just 1 business day. Mapping strategies are one of the most important and complex elements of transition planning. Be careful to map to funds that are in fact similar, not to funds that have similar sounding names or objectives.