PowerPoint Presentation

Workshop 15 Establishing Timelines & Expectations for Smooth 401(k) Take Over

Virginia K. Sutton, QKA, QPFC Johnson & Dugan; VKS Consulting

Virginia K. Sutton, QKA Consultant; Account Executive, VKS Consulting; Johnson & Dugan

Virginia K. Sutton specializes in 401(k) defined contribution plans, helping clients regarding all phases of their qualified retirement programs, including plan design, investment selection and review, compliance, vendor assessment, plan conversions, employee education, and mergers and acquisitions. Virginia is a member of ASPPA's government affairs DOL subcommittee and ASPPA's affiliate NAPA, the National Association of Plan Advisors. She is past chair of ASPPA's participant communications and chaired the 401(k) Plans Subcommittee (2003-2007). Virginia is a Investment advisory representative of Global Retirement Partners, LLC, a registered investment advisor. Global Retirement Partners, LLC, VKS Consulting and Johnson & Dugan Insurance Services Corporation are separate and non-affiliated companies. Johnson & Dugan CA Insurance License 0649686

The Three Cs of Successful 401(k) Takeovers:

? Coordination:

? Who does what? ? Timing

? Checklists:

? Process Documentation ? Plan Documentation

? Plan Documents ? Internal (Plan Sponsor) Governance/Oversight

? Investment Selection & Mapping ? Asset & Records Transfer

? Communication

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Time-table

Who

Task

Coordination

Who Does What?

401(k) Structure & Concept

ABC, INC. Plan Sponsor

ABC, INC. 401(k) PLAN

$

ADMINISTRATION

INVESTMENTS ? Mutual Funds ? Separate Accounts ? Pooled Account ? Stable Value/GIC

ASSET CUSTODIAN ? Holds assets ? May or may not include

institutional trustee services

RECORDKEEPING ? Account balances ? Remittance &

distributions ? 800#/web/statements ? Trust reconciliation

COMPLIANCE ? Plan documents ? IRS LOD or term. Filing ? Discrimination testing ? Loans & distributions ? 5500

5

Process Overview

Vendor Selection

Plan Design & Plan Document Drafting

Investment Selection & Mapping

Plan Operations & Training

Employee Communication & Presentations

Assets & Records Transition ("Blackout")

"GO LIVE" On-going Admin

"RFP" Vendor evaluation

Consultant with HR/plan fiduciaries ("PF")

1-6 weeks: 2-3 week prep & meeting to decide

Review current plan design & draft Plan Docs; (make changes)

Determine Plan Funds/ QDIA & Mapping Strategy

TPA/Complian ce Team/Consulta nt with HR/PF

Consultant/V endor-HR

2-3 weeks: 1-3 hr. meeting with HR/PF + drafting time: Execute prior to Eff. date.

1-3 hr. meeting with HR/PF

Payroll remittance/ad min training

Communicate plan to eligible participants; SOX notice & plan disclosures

Vendor-HR Consultant(Consultant) Vendor/TPA

Asset Transfer & Trust Report Reconciliation & Allocation to Participant Accts

Former Custodian & Recordkeeper/TP A with you!

1-3 meetings: 1-3 hrs each In person or phone/WebE x

Written Notices: 3060 days In Person Meetings-depends on client

Prior RK determines: 3-10 days prior to effective date + 520 days post

Participant Web access; EE meetings if none held prior to black-out

Loan Repayments & Participant contributions are remitted & invested

Ongoing Plan Oversight

Plan Conversion is generally a 90-120 day process from date of vendor selection

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Conversion Process

? The conversion process will be complex or more simple depending upon size of the plan

? Conversion of a small plan is less complex than a change of service-provider for a large plan

? Exceptions:

Determine how to leverage technology

? Large proportion of terminated participant accounts will make plan communication/conversion more complex

? An employer with no internal processes/manual payroll

? Large Plans that have strong data management and are "Rebooting" and automating participant decisions

Role of Plan Advisor/Consultant

? If an Advisor has been involved during the RFP/Selection process, they will want to continue to be involved in the conversion process:

? If you have a strong conversion project leader, most advisors will want you to direct the process

? In the absence of a strong conversion project leader, or concern that there is no leadership for the takeover, the advisor may assume that role ? This in turn, may complicate your process

? The advisor will/should want to work with you regarding the investment review and selection/mapping & employee communications

Plan Takeover/Conversion Planning

? Once a service provider is selected, the next step is a meeting with the service provider (and TPA partner) to determine the implementation timeline and who will be accountable for each part of the process:

? Plan Design & Plan Docs

? Investment Review & Mapping

? Employee Communication & Enrollment

? Initial and on-going administrative processes

TPA/Compliance Team

? Plan design ? Drafting of the plan

documents & participant notices ? Execution of the plan documents, including board resolution to adopt the plan and trust ? 408(b)(2) Disclosures

Advisor/Consultant/RK

? Investment Selection & Transition Mapping Strategy ? Determine Funds ? Special Documentation ? e.g. SVF participation agmt ? QDIA ? Mapping

? Fund set-up with trading platform & custodian

? Execute trust documents

TPA/RK/Advisor/HR

? Employee Communication/ Enrollment ? Online or via paper ? Face to face meetings

? Participant Fund/Inv Info: ? 404(a)(5)

? Beneficiary designation ? Clarify who is drafting & who

distributes

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Checklists

Please refer to Supplemental Handouts

Sample On-Boarding Record Sample 401(k) Conversion Checklist Sample Conversion Timeline

Get Organized

? Checklists are your friend! ? A conference call with all parties to establish roles and timetable will facilitate

this detailed process ? Look at a calendar and back into key/deadline dates

? Realize that required notice periods mean implementation is at least 60 days; most set ups are 3-4 months depending upon the complexity of the data/size of plan.

? Who will act as the lead project coordinator? ? Advisor ? Recordkeeper ? TPA ? Plan Sponsor

? Ongoing (e.g. weekly) conference calls or emails are a good idea to keep the process on track

? Help the plan sponsor to understand and manage on-going responsibilities by setting proper expectations as part of the set up process

Garbage Out is Garbage In!

? Data Management is KEY to a successful conversion

? Help the Plan Sponsor (or have the Advisor help you!) clean up the plan records PRIOR to take over

? Spending more time on the operations/payroll processes

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On-Boarding Record

? Ideally this is a comprehensive document that is integrated with your client management software and/or plan design software

? Alternatively, you can create and use it to populate your internal systems.

? Checklists can be more or less complex depending upon plan size and your role

Sample Conversion Timeline

TASK

WHO

DEADLINE

DATE COMPLETE

Conversion Meeting

all

10/1

10/1

Contact Prior RK

ER/NSP

10/15

10/13

Plan Doc/Fund Mapping

NSP/AD

10/30

10/20

SOX Notice

ER (NSP)

11/19

11/15

Test Files/payroll upload

ER/NSP

Nov

Blackout

ER

12/20-1/20

Asset Transfer

PRK/NSP

12/31-1/4

Record Transfer/Allocation

PRK/NSP

1/8

Plan is Live!/First Contribution

ER/NSP

Jan 15-20

EE Training

AD/NSP

Feb

ER=Plan Sponsor; NRK=New Service Provider; PRK=Prior RK; AD=Advisor

Plan Design Considerations

? Review of Current Plan Design & Plan Documents

? Will you continue to use the existing plan documents or restate to a plan document that you have more comfort/better aligns with the recordkeeper?

? Add "Auto" features (ACA, EACA and/or QACA?)

? Is this the time to "reboot" the 401(k) by re-enrolling all participants or putting participants into QDIA fund(s)?

? Distribution options: trim or add

? Most 401(k) plans remove J&S or installment options because 401(k) investment options can provide

? Safe harbor plan design

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