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:
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Mailing of required participant notices
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Participant address verification
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Multi-lingual call center support for responding participants
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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:
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Verification of/updates to participants’ last best-known address
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Locating beneficiaries of deceased participants
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Utilization of multiple web-based resources
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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.
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Continuous efforts made to locate missing account holders
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Straightforward, easy-to-understand fee structure
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Monthly account maintenance fee vs. annual fee
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No lock-up provisions
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Ability to move assets to more suitable investment options
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Account consolidation assistance
5. Make sure the provider has a proven track record in facilitating plan terminations.
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How long they’ve handled terminating plans
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The number of terminating plans they’ve worked with
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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.
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