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When is the required Sarbanes Oxley Notice required to be sent?

The notice must be sent to all eligible participants in the plan as well as anyone with a balance (including those that have left the company) at least 30 days before the current recordkeeping service provider shuts off access to the recordkeeping system for any inquiry services or transactions for three consecutive days. This is typically 45 days before the effective conversion date. This notice should not be sent until the current recordkeeping service provider has confirmed the conversion.

The 30-day advance notice requirement can be waived if:

  • Violates the exclusive purpose rule under ERISA/delaying the conversion is not prudent
  • The events related to the conversion were unforeseeable or beyond the reasonable control of the plan sponsor/administer
  • This notice does not apply to solok plans.


What dates should we put on our Sarbanes Oxley Notice?

We recommend using a blackout period as follows:

  • Start date of ' Week of ___________’ (this is derived from the date the current recordkeeping service provider indicates they are shutting off inquiry and transaction status to participants)
  • End date of 'Week of _______' (we recommend 6-8 weeks after the effective conversion date, as this allows the maximum buffer)

It is important to use dates that can be met; so as not to send a second notice with reasons for missing the first notice blackout period. In addition, we normally suggest using the 'Week of' on both ends of the conversion, as there are no guarantees as to the exact date when the system will be shut off or the conversion will be completed.


What is the effective conversion date?

This is typically the date the monies are wired from the current recordkeeping service provider to the new recordkeeping service provider.

The subsequent participant conversion records delivered 1 - 10 business days later should match the wire. If the conversion records do not match the wire, the current recordkeeping service provider must provide detailed accounting of the differences.


What entity is responsible for the compliance/TPA services?

It is typically the entity that holds the records as of the last day of the plan year. Plans that convert late in the plan year whereby the effective date is before December 31st (for calendar year plans) will want to make sure they are not paying twice for compliance and government reporting services.


As an investment advisor or plan sponsor what are some of the common issues we can avoid during a conversion?

If you poll recordkeeping service providers or TPA's they will highlight the following:

  • The plan sponsor did not notify the current recordkeeping service their services were no longer required, hence the conversion is moved back and creates credibility issues. Unbelievably, a common error is the investment advisor or plan sponsor think the new recordkeeping service provider or TPA can officially notify the current recordkeeping service provider (and I am sure some recordkeepers and TPA would love this authority).
  • Surprise back end fees from the current service provider or funds
  • Longer notice restrictions, such as 60 - 90
  • Communications between all parties or communicating an effective conversion date that can not be met
  • Lack of delivery of prior year compliance tests and government reporting to the new TPA/recordkeeping service provider
  • Selecting closed funds for the new investment menu (of course these are usually discovered after the participant communications). This is somewhat of interesting issue, as the recordkeeping service providers believe the investment advisor/broker is responsible and the investment advisor/broker believe the recordkeeping service provider is responsible.


What is the normal recordkeeping conversion timeline?

Virtually all of the recordkeeping service providers we work with complete the conversion with 10 business days upon the accurate and complete receipt of both of:

  • The conversion wire
  • The participant records

The two key variables related to an accurate and timely conversion are:

  • The current recordkeeping service provider delivering the conversion records in a timely fashion. The average time period for plans coming from a daily environment is five business days. The average time period for plans coming from a non-daily environment is 35 business days.
  • The total of the participant records matches the conversion wire (and all participant records are complete at account source level and required buckets related to loans, distributions, and Roth).

The ten-business date clocks starts when the new recordkeeping service provider receives 100% of all the information in a complete and accurate format.


How are the conversion monies handled during the blackout period?

Typically plan sponsors have two options for investment conversion monies:

Option 1 – Mapping

Mapping is the conversion methodology that invests a participant’s account from the current recordkeeping service provider by fund into a like fund on your new menu with your new recordkeeping service provider. A majority of converting plans use this approach because it is easy to communicate, keeps the participants long term investment strategy intact (as best as possible) and it minimizes their time out of the market during the blackout.

In order for the new recordkeeping service provider to complete this methodology timely, they will need the liquidation report by fund from the current recordkeeping service provider with the conversion wire (or shortly thereafter).

Please note, most recordkeeping services that use this approach will leave the converted monies in these funds until the participant elects to transfer the monies. The investment election is only for ongoing contributions and loan repayments.

Option 2 – Liquidate and Reinvest

The other option for plans coming from a daily valuation environment is the conversion monies are invested per their new investment elections. This places an increased emphasis on participant ‘investment election’ gathering, as those that do no submit an investment election are defaulted to the plan default fund. In addition, the monies are not invested until ten business days following the completion of the following two events:

  • Assets received
  • Accurate and complete records are received from the prior recordkeeping service provider

The ‘liquidate and reinvest’ approach can have the monies out of the market for up to 30 - 60 days if the prior recordkeeping service provider does not send complete and accurate records (or monies) timely.

There is a third option, which is the 'in-kind' option. Many recordkeeping service providers do not allow for this option. For further information on this approach, contact us directly.


As an investment advisors, what are the key components I need to discuss with the plan sponsor and participants?

When you meet with the participants, please make sure the following questions are answered in your presentation:

  • What happens to the monies at the current recordkeeping service provider before the effective conversion date?
  • When will the participants see the conversion monies posted on their accounts at the new recordkeeping service provider?

To answer these questions, it is important the participants understand the conversion methodology (as the answer is different dependent on the conversion methodology.

For plan sponsors that elect the 'investment election approach’ it is imperative the participants understand their monies will be out of the market from the day the current recordkeeping service provider liquidates their assets (use approximate dates) through ten business days (or the committed timeframe of your new service provider) following the receipt of the accurate and complete participant records and wire (see the question and answer above).

For plan sponsors that elect the ‘mapping approach’ it is imperative the participants know when the current recordkeeping service provider is liquidating the assets and wiring the assets to the new recordkeeping service provider/custodian. Most new recordkeeping service providers will be invest the conversion wire within two business days upon receipt of both of the following events from the current recordkeeping service provider:

  • 100% of the wire is received
  • A report from the current recordkeeping service provider indicating the exact liquidated amounts at the fund level (this is typically emailed)

Participants will see their conversion monies invested upon completion of the recordkeeping conversion.


The content of this website is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances.