Years ago, back in law school, I was the Executive Editor of the student news magazine. It wasn’t the New York Times, but it was our little soapbox to gripe about professors, tuition hikes, and the lousy food in the cafeteria. In one of my last issues, a friend of mine wrote a piece that was as hilarious as it was true. His beef was with the timing of professor evaluations. They were always handed out before final exams, before we knew our grades. He argued, quite convincingly, that evaluations should come after grades, because nothing colors your impression of a professor like the grade you get. In his words, a good grade meant you’d happily wave to that professor on the street; a bad grade meant you wouldn’t even relieve yourself on them if they were on fire. It was crude, it was biting, but it was also dead on. Our real view of the class usually came after we saw our transcript.
That article sticks with me because it reminds me of retirement plan sponsors and their relationship with third-party administrators (TPAs). Sponsors usually don’t get the real picture of their TPA’s competency until they’re walking out the door—during the dreaded de-conversion process. A de-conversion is just what it sounds like: unwinding your plan from the old TPA to hand it over to the new one. And like moving apartments in the middle of a New York summer, it’s rarely fun and sometimes downright miserable.
Why is it harrowing? Because the truth comes out in the move. If you’ve been working with a solid TPA, or if you’ve kept an eye on things with annual compliance reviews, then de-conversion is smooth. The boxes are labeled, the furniture makes it through the door, and you can actually see the floor when it’s done. But if you’ve been asleep at the wheel—if you don’t know the difference between the ADP test and ADP, the payroll company—you’re in for some nasty surprises.
I can’t tell you how many times I’ve been called in by a plan sponsor during a transition, only to find skeletons tumbling out of the compliance closet. Plans that should have failed their Top Heavy test but didn’t because the TPA flubbed it. Plans with years of overcharging hidden in plain sight. And let me tell you: no new TPA wants to inherit a mess. They’ll make you clean it up before they take on the plan, which means more cost, more headaches, and more sleepless nights for the sponsor.
That’s why I always tell clients: don’t wait for a breakup to find out who you were really dating. Do an annual review. Call it a plan tune-up, a compliance check, or whatever you want, but get an independent look at your plan’s administration. Whether it’s my $750 Retirement Plan Tune-Up or someone else’s review, the point is the same: know what you’re dealing with before you’re forced to confront it. Because when it comes to TPAs, the evil you know is always better than the evil you don’t.
