What to do when your plan’s case manager or advisor is acquired

During a recent TPSU program, a plan sponsor shared the issues she is having following the acquisition of her records manager. Even though she conducted extensive due diligence on the new vendor, a well-known Fab Five registrar with more than enough resources and technology, she still encounters problems.

The problems stem from the fact that his service team at the former accountant, who intended to stay after the acquisition, eventually left. The plan sponsor was left on his own, assigned to a new team trying to navigate new systems and procedures. Yet, as unhappy as she is, she is once again hesitant to switch providers, as it could upset the employees.

At the same time, another plan sponsor participating in the TPSU program who uses the acquiring provider was very happy because this records manager helped his company conduct an acquisition and significant downsizing on its own.

A cautionary tale indeed as greater consolidation of record keeping is expected with 44 national providers while only five have significant scale with over 10 million participants.

All of this raises the question of whether plan sponsors should conduct a written due diligence process and request for proposals when acquiring their pension advisor, which is happening more frequently as this industry matures. consolidated.

Even if the lead RPA remains with the new company, it’s more likely than not that some aspects of the service model will change, along with the supporting people and technology. There may be new rates and new services offered that the plan may or may not want, while other services may be discontinued. The question is not whether the new relationship is as good or better, the question is whether it is different and appropriate for the plan and the participants.

Because all ERISA plans must perform careful, documented due diligence periodically, but especially when acquiring their service provider or advisor if they are being paid from plan assets. Even if he were paid directly, it would be prudent business practice.

Just as it is not acceptable for a plan to accept a proprietary date fund from a registrar without documented and careful due diligence, a plan cannot accept a new vendor or advisor relationship without the same careful process.

The problem for plans when their advisor is acquired or even changes company, broker or RIA is who will help them perform the due diligence as a prudent expert? Advisors can assist registrars, fund managers and even third-party administrators in their acquisition, but just as with the required periodic RPA due diligence and request for proposals, the advisor cannot conduct an unbiased review of himself or his new business.

Even with proper due diligence, unforeseen changes can occur, as was the case with the plan sponsor participating in the TPSU program. His service team, who intended to stay after the sale, ended up leaving, which is more than likely with any sale. The same can happen with consulting firms, and even if the lead RPA stays on for a while due to an earn-out, their service team or service model may change.

So, while there’s no way to predict what will happen, the prudent course for any plan sponsor whose service provider is acquired is to conduct a thorough and careful due diligence process, obtaining offers other companies as well as service guarantees and quotes even from the acquiring company.

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