Learn what to expect when changing recordkeepers to avoid unpleasant surprises.
Transitioning to a new 401(k) recordkeeper shouldn’t be a taxing experience. We’re going to review, step-by-step, the events that occur during a recordkeeper transition. With our clients, we have found that when they are adequately prepared for the events ahead, everyone experiences a smooth transition.
Congratulations! Recognizing the need for change is the first step toward finding a solution. In this case, you have decided to move to a new retirement plan recordkeeper. Chances are, you have evaluated a few different options, and based on your plan’s needs, you selected the best one.
To officially begin the relationship, your new recordkeeper will request new business paperwork. That typically involves:
Those are the initial documents needed to move forward and begin the transition process.
Once all the documents are received, your recordkeeper relationship manager will review them and confirm that the information is in good order. Typically, this process takes a few days to a couple of weeks, depending on how quickly the documents are received and reviewed.
Keep in mind that this is an opportune time to make changes to your current retirement plan. For example, if you have been thinking about auto-enrollment, auto-escalation, plan design changes, force-out provisions, or other adjustments, now is the ideal time to discuss them and update your plan prior to implementation.
Four essential functions are going on during this time:
Reminder: Don’t forget about former participants. They are still active members of the plan and must be informed of changes.
The plan conversion is nearly complete. The last steps include transferring assets, followed by confirming that everything has been successfully transferred and allocated into the correct participant accounts. The final stage effectively ends the Blackout Notice period, meaning your plan participants can view their account balances and make investment changes.
Going forward, all new payroll uploads will happen on the new recordkeeper’s platform, and your dedicated relationship manager will be available for questions, comments, and ongoing support.
For our clients, we aim to provide clarity and consistent communication throughout the recordkeeper conversion process. We realize this is outside the normal course of business, which is why we are here to guide you step-by-step through the process. Changing retirement plan recordkeepers can be stressful, but we have found that when our clients are prepared beforehand, the process is much more effective, making the conversion a win-win for you, your business, and your employees.
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This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.
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