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NAGDCA Note: A Guide to Plan Transition

While plan sponsors look forward to positive relationships with the firm or firms they’ve selected to administer their DC plans, they also have the fiduciary responsibility to ensure that the services being provided are at a responsible cost and transition firms when necessary.

Changing a Third-Party-Administrator (TPA) for your defined contribution plan can be a significant undertaking. It involves not merely the transfer of records but the transfer of services and processes, many of which may be highly customized to your plan’s unique design. The focus of this publication is to provide you with guidance and helpful hints if you’re considering a TPA transition.

The focus of any TPA transition should be to comprehensively and as seamlessly as possible transfer your records and functions from one provide to another while minimizing disruption to your active and retired plan participants.

Transition preparation
  • TPA Notification – The first step in transition is for the plan sponsor to provide proper written notification to the TPA(s). Most contracts will have a Termination Section outlining the terms and process for notification. 
  • Transition Meeting and Plan – Initiate meeting with your incoming provider as soon as possible to develop a transition plan and to address the details of your unique plan services and requirements. The incoming provider will need this information to ensure that they capture all of your special requirements. 
  • Plan Sponsor Transition Responsibilities – The plan sponsor should be prepared to take on certain responsibilities during the transition, even though the incoming TPA will be the primary driver for much of the plan transition work, because the provider will not be as well versed in some of your unique requirements and operations. 
  • Incoming TPA Responsibilities – The TPA is responsible for creating and executing a transition plan. 
  • Outgoing TPA Responsibilities – A successful transition requires the support of the outgoing TPA(s). Your outgoing provider should be engaged and responsive and understand that their active cooperation will help sustain their reputation in the market place, as well as benefiting the plan and its participants. 
  • Participant Communications – Early and informative participant communications should be a priority for a successful transition process. Changes of this magnitude can be disturbing to participants, so the more information they have and the earlier it is communicated the more you can help them navigate the process successfully. Communications should disclose all material information that is required to be provided or may impact a participant’s account and engage the participant in ways that promote awareness of the most essential pieces of information. -
  • Written Materials – The design and content of your written communication materials will likely change with your new TPA; the transition provides an opportunity to refine and improve your materials. -
  • Web-Based Communications – Special customized web features and a customized look and feel may be part of the incoming TPA’s services; enhancements in particular should be highlighted for participants. 
  • On-Site Meetings – Participants respond favorably to opportunities for in-person, on-site education, so that they can learn about and build trust with the new provider. Having the new TPA’s staff available for meetings to help explain their services will go a long way towards helping participants become comfortable with the change. 

Plan Transition Process
  •  Administrator and Payroll File Testing – During a transition, data will flow from your former to new administrator, and you will be required to establish new data exchanges between your employer payroll system and new provider. Below are specific data points to which an administrator should pay special attention during a transition: 
    • Loans 
    • Brokerage Accounts 
    • Pre-tax and After-tax (Roth) Contributions 
    • Managed Accounts 
    • Required Minimum Distributions 
    • Beneficiary Records
  • Investment Selection: Mapping vs. “In-Kind” – If your change in TPA also involves a change in investment management, plan sponsors may seek the support of an outside consultant. The plan sponsor should also review its Investment Policy Statement (IPS) to make sure all planned changed are in compliance with the IPS, or determine if any amendments are needed to the IPS. Stable Value/General Account changes will generally require special transition considerations as there may be limitations or consequences applying upon the liquidation of assets. 

Plan Transition Timing
All of this preparation and planning comes to fruition at the point of actual plan transfer to the incoming record keeper. The outgoing record-keeper will usually impose a “black-out” period before the plan transfer in order to prepare for the successful transition of plan data. It is important that this blackout period be communicated to participants as clearly and as early as possible and, and allow for the potential need to address missing information or resolve data reconciliation issues.

For more information regarding Plan Sponsor Education, and other Best Practices, check out NAGDCA's Best Practices Guide at


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