The plan conversion process involves inclusion of a strategic approach as per investment advice provided by the Registered Investment Consultant or Registered Investment Advisor (RIA) to the fiduciary of the plan.
As part of the new strategy, the new TPA could:
a) Liquidate all the assets and deposit the cash in a holding account until new fund model derivation;
b) Map the existing assets to the new fund; or
c) Maintain current investments intact in case of recordkeeping-only conversion
Organizations consider conversions for several reasons – to improve the speed of administration service and the accuracy of plan administration, to lower the cost of plan administration, for new investment ideas and additional services. Through the conversion process, they can also check the recordkeeping conformance of prior TPAs.
However, the conversion process also has a lot of challenges. Some of these involve:
Establishing frequent and open communication with the client and the previous service provider to remove conundrums in the process, for smooth conversion.
Plan implementation in short span of time with speed and accuracy.
Transferring existing plan records from the old TPA’s system environment to the new TPA’s system environment.
Implementation of investment strategy. For instance, a Daily-to-Daily conversion involves the transfer of assets when there is a change of investment options as part of the conversion.
Delays in the conversion process, at any level, which will have a domino effect on the other courses of action in the process. This may lead to lengthening of conversion timelines. For instance, any delay in data collection from the old TPA may lead to extending the plan implementation date.
Given the nature of challenges, Plan Conversion requires a conversion specialist who is adroit at administration and willing to wear many hats to ensure smooth transition.
Primarily, they are project managers, who are willing and able to work together with different kind of individuals in the market and bring their actions to a successful conclusion.
This is the second of a two-part article on Plan Conversion. Read Part 1 – Benefits and Best Practices