A 401(k) plan has three key providers. The first is the recordkeeper, who’s primary responsibility is to track the assets in the plan so that employees and plan sponsors know what they have in the plan. Recordkeepers typically provide websites for participants and sponsors to view balance information, provide account statements and process distribution requests. Next is the plan’s investment advisor, like The Joseph Group, who assist in picking the core investment lineup and provide education to employees. The final provider is the plan’s third-party administrator. This is who is responsible for completing the plan’s annual testing and tax filings (Examples: 401(k) discrimination testing, match calculations and 5500 filing). In some cases, different providers take on different or additional responsibilities, but each play a critical role in the success of the retirement plan. So, what do you do when one of your providers are involved in a sale/merger/acquisition?

You may or may not have seen some of the recent movement in the recordkeeper space. One such example being Empower’s purchase of Prudential’s recordkeeping business. The financial services industry, especially in the retirement plan industry, tends to see periods of expansion, where many new providers launch new products and start building their business. This is generally followed by periods of contraction, where some of these companies will be acquired or merge. These changes tend to come in waves and once the first deal is announced, more tend to follow. This is not uncommon, or limited to the retirement plan industry.

So what should you do if one of your key plan providers is involved in one of these deals? Whether it’s your recordkeeper, your administrator or even your advisor, what tasks should you focus on during this process? Below is a four-step process to help guide plan sponsors through the evaluation process and make decisions on the future of their retirement plan and providers.

1. Begin Gathering Information – Make sure you gather information about both the change, as well as the new company. For example, if your recordkeeper was purchased, Who purchased it? What can you find out about that company? What do others have to say (including existing plan partners) about the new company? Gather as much information as possible.
2. Take Inventory – Once you’ve gathered this information, think about what is most important to you and your team. “Why did you choose this partner the first time?” Reach out to your team members and find out what matters to them regarding the retirement plan. What do they like most about current provider? What could be improved? Prioritize and/or rank these responses according to the feedback from most to least critical.
3. Review and Benchmark – It’s important to consider the fees at each provider and compare that with the service you receive and the features that provides you and your team. Has anything changed since you first started using this provider? This would be a great time to reach out to trusted business connections or advisors to get their perspective on your situation.
4. Determine Action Steps – What end result do you want to see and what is the first step to get there? Make a list of what needs to happen and work with new/current providers to determine a timeline. For example, if the decision is to move to a new provider, the first step generally involves some paperwork and notices to employees.

It’s important to note that not every outcome will be to stay with the current provider. In some cases, these types of transactions benefit employees and plan sponsors. In other cases, it may make sense to move the plan. Gathering all of the important information regarding the situation and asking both internally and externally for opinions helps make the best decision for the team.

This provides you as plan sponsor the perfect opportunity to both evaluate what you and your team need and determine if a new course is what best fits your situation.

How can we help? If you find yourself in a situation where one or more of your service providers have been bought, sold, merged or acquired, we would be happy to offer a complimentary plan evaluation which typically includes:

1. Evaluation of Advantages/Disadvantages involved in the change
2. Complete Fee Benchmarking and Service Provider Review
3. Investment Menu and Share Class Review
4. Plan Design Review

Please reach out to me directly to arrange your review today.

Written by Matt Kruckenberg, Manager of Retirement Plan Services. Matt can be reached at 614-907-8639 or matt.kruckenberg@josephgroup.com