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  • Writer's pictureJordan Cross

Is It Time to Consider a New 401(k) Recordkeeper? Part 2

As a follow up to the prior post, we will explore what to expect when changing recordkeepers to avoid unpleasant surprises

Change can be exciting, but sometimes stressful. Transitioning to a new 401(k) recordkeeper takes time and requires up front work, but with your financial advisor, CrossPlans and new recordkeeper, it shouldn’t be a taxing experience.

In this article, we’re going to continue our discussion from Part 1 and talk step-by-step through the events that may take place and provide inside knowledge about what to expect, so there are no surprises when changing 401(k) recordkeepers.

We have found that when our clients are properly prepared for the events ahead, everyone experiences a smooth recordkeeper transition process.

Step 1 | Organization and data drives the process

To officially begin the transition, your new recordkeeper will request New Business Paperwork. Your financial advisor and CrossPlans will help complete as much as possible and work to get contracts and paperwork as complete as possible.

That typically involves:

  • Retirement plan contract

  • New investment selections

  • Banking Information

  • Census Data

  • TPA coordination (plan documents, amendments, valuations, Form 5500 and/or additional documents)

  • Payroll info and payroll integration Info

Those are the initial documents needed to move forward and begin the transition process.

Step 2 | Review

Once all the above documents are received, your implementation manager will review them and confirm with CrossPlans and your financial advisor that the information is in good order. Typically, this process takes a few days to a couple of weeks, depending upon 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 with your plan consultant at CrossPlans and update your plan prior to implementation.

Step 3 | Setup

There are four important functions going on during this time:

  1. Payroll. The recordkeeper will walk your team through the process of uploading and submitting payroll. If not already provided, they will most likely ask for a company census to assist with the initial upload. If available and functional, payroll integration may also begin at this time and while that may take a couple extra weeks to get up and running, it is worth the extra work to better automate your payroll and 401(k) contributions.

  2. Transfer of assets. By now, your former recordkeeper has been informed that your plan is moving to a new recordkeeper. The formal process is begun by sending a Liquidation Request letter to your former recordkeeper. Most recordkeepers have a department that specializes in transfers. Your new department will work together with your old one to coordinate the transfer of assets. Then, the next step is to distribute a Blackout Notice to your employees, which notifies them that for a window of time (usually between 3 – 10 days), they will not be able to make any changes to their retirement plan account. This is when the entire plan’s assets are in motion (meaning being transferred).

  3. Account openings. Your participants accounts are opened on the new recordkeeper’s system. These accounts are not funded at this time because the assets are in transit. Once the assets are transferred, your participants will see the same accrued account balances.

  4. Enrollment meetings. Let’s get excited: it’s time to enroll and educate your employees about the new recordkeeper and the opportunity to share details of any new capabilities. These may include online tools, financial wellness resources, income projections and more. Depending upon how the plan is setup and potential enhancements to design features, meetings are a way to inform employees about how you are helping them on their savings journey toward retirement.

Also, remember to communicate with former participants. Terminated employees with account balances are still active members of the plan and need to be informed of changes. This will be addressed by the implementation manager and will require mailing documents to terminated employees with account balances.

Step 4 | Completion

The plan conversion is nearly complete. The last steps include the transfer of assets, followed by the confirmation that everything has been successfully transferred and allocated into the current participant accounts. The final stage and 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.

In this together

For our clients, we aim to provide clarity and consistent communication throughout the recordkeeper conversion process. We realize that 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-win process for you, your business and your employees.


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