January 1, 2017 is a long way away. Many 401(k) retirement plan fiduciaries (and investment committees) become intoxicated by the summer-slow-down occurring each year during the months of July and August. Plan administration, plan servicing, investment management, custody services and recordkeeping continue running with the efficiency and predictability of a Swiss watch. However, during the summer it is not unusual for plan fiduciaries to schedule vacations and for retirement plan advisors to so the same. Face-to-face visits between plan sponsor fiduciaries and retirement plan advisors for second quarter performance monitoring do not seem to occur on the same schedule as during the remainder of the calendar year.
Attention to Investment Policy
A good use of time during the summer slow-down is to prepare Investment Committees for what they may be facing on January 1st. If the Plan needs to revise the 401(k)Plan investment lineup by next year it makes sense to commence work on investment updates as quickly as possible. Even though there are 4 full months before January 1st let’s review the steps that may need to be accomplished.
At the Custodian & Recordkeeper
Starting at the endpoint of January 1, 2017, all paperwork and Notices need to be in place by no later than December 30th. Since many administrative elements must be firmly in place before a planned investment switch can be executed, as a precaution to avoid “last minute glitches” a safe expectation would be to have all documentation in place by December 15. Doing so provides a 5 business day cushion prior to December 23, which is normally not a full business day.
The Department of Labor requires a 30-day notice (communication) to plan participants prior to implementing plan-level investment changes. If wanting to meet the December 15 date, the plan sponsor should plan to make notice to participants by November 15. In many cases corporate counsel, or ERISA counsel, will ask to review the Notice and the plan document in advance of the plan administrator executing the documentation and posting the Notice. To receive final documentation from counsel, you may need to deliver forms and documents to counsel by November 1st – allowing for a 10 business day turnaround.
Between Now and October 31
Begin with the June 30, 2nd quarter investment results. If an Investment Policy Committee has already held the 2nd Quarter Meeting, and recognized the need for fund replacements, there should be plenty of time to meet a January 1, 2017 fund replacement. However, if the 2nd Quarter meeting is still to be scheduled there is a lot of work to do – and not a lot of time to complete all of the tasks. Timing is variable with all advisor and providers – but the tasks needing to be completed by October 30 are:
Schedule Investment Meeting with Investment Committees and Investment Advisor;
Hold Meeting and Review Investments – Determine if any need to be replaced;
Search for investment replacement options
Select replacement investment (perhaps requiring an additional meeting)
Obtain Documentation (for investment switch and participant notification)
