Terminating a retirement plan takes a lot of work, a lot of planning and requires specialized skills. 

Not surprisingly, most fiduciaries choose to outsource plan terminations to service providers.

Selecting an outsourced provider is a critical decision. To help simplify the process, we suggest using the five criteria below (and scroll down to watch the video that discusses those key criteria) for selecting a plan termination services provider:

1. Check that the provider delivers a full range of services including the following:

• Mailing of required participant notices

• Participant address verification

• Multi-lingual call center support for responding participants

• Safe Harbor IRAs for unresponsive participants

2. Confirm the provider has expertise in locating missing participants.

The DOL is very specific about what is required if a participant is deemed to be “missing”. When selecting an outsourced provider make sure they have a proven track record of fulfilling those requirements including the following:

• Verification of/updates to participants’ last best-known address

• Locating beneficiaries of deceased participants

• Utilization of multiple web-based resources

• Oversight of USPS Certified mailing

3. Provider should focus on minimizing cash outs and promoting account consolidation.

Unfortunately, many participants will be tempted to cash out their retirement savings during a plan termination.

To help reduce cash outs and increase retirement account consolidation to an existing account, like a new employer’s plan, make sure the provider has professionals who will provide distribution counseling.

4. Be sure the provider offers fiduciary-friendly Safe Harbor IRAs and on-going account support.

• Continuous efforts made to locate missing account holders

• Straightforward, easy-to-understand fee structure

• Monthly account maintenance fee vs. annual fee

• No lock-up provisions

• Ability to move assets to more suitable investment options

• Account consolidation assistance

5.  Make sure the provider has a proven track record in facilitating plan terminations.

• How long they’ve handled terminating plans

• The number of terminating plans they’ve worked with

• The mix of large vs. small plans

This is the third video of a three-part series on DC plan terminations, presented by Mike Wilder, Vice President of Client Services, Retirement Clearinghouse.