A Plan for Managing the Complexities of a DC Recordkeeping Change

A Plan for Managing the Complexities of a DC Recordkeeping Change

Plan sponsors can take steps to ensure a successful transition

For retirement plan sponsors, implementing a change to defined contribution recordkeeping providers can lead to improved plan services, cost-savings or to both outcomes for the long-term benefit of participants. Depending on the circumstances, however, the process of moving from one service provider to another can be a complex, multi-faceted undertaking. Risks associated with the conversion can be effectively managed under a comprehensive transition plan as part of a DC plan’s overall approach to managing operational risk, according to Segal Consulting.

“DC plan recordkeeper transitions require care, commitment, cooperation among the parties and clear communications to participants,” said Wendy Carter, defined contribution director with Segal. “With thorough advance planning, effective documentation, diligent follow-through and quick action to correct course, as needed, a transition can be smooth and successful.”

Major action items involved in a transition include:

  • Data Conversion – Create a secure conversion guide for “mapping” data from the outgoing recordkeeper’s system to the incoming system.
  • Plan Administration – Reach an agreement on services and create a new website address and establish processes for various participant transactions, such as contribution elections and investment designations.
  • Participant Communications – Announce and promote the coming recordkeeper change to participants and market the plan to non-participants by explaining the enhancements.

“A service provider transition may present unique challenges for each plan sponsor,” noted Julian Regan, senior vice president with Segal Marco Advisors, the investment solutions provider of The Segal Group. “Payroll processing complexities, data transmissions, and investment mapping processes present risks, but each can be managed effectively under a well-documented, mutually agreed-upon implementation framework.”

To speak further with a consultant on the risks of vendor management or other components of operational risk, please contact Todd Kohlhepp.

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Segal Marco Advisors, a member of Segal, provides trusted advice that improves lives. Segal Marco delivers innovative, client-driven investment consulting advice, outsourcing solutions, proxy voting and corporate governance services. Clients include joint boards of trustees administering benefit plans under the Taft-Hartley Act, state and local governments, corporations, non-profit organizations, endowments and foundations. The firm works with financial services firms through Rogerscasey, a Division of Segal Advisors, and with Canadian clients through Segal Rogerscasey Canada.