NEW YORK -- When Mount Kisco Medical Group PC changed semibundled service providers for its $35 million 401(k) plan, all participant records were converted in less than 24 hours.
The Mount Kisco conversion began the afternoon of May 9 and by the next day, the records for the 320 participants, including their loan information, were switched over to MassMutual Retirement Services' system, said Patricia Gondolfo, chief financial officer for New York-based Mount Kisco Medical Group.
A typical blackout period for a conversion is between four and six weeks, said Ann Mahrdt, senior consultant for Spectrem Group, New York.
The minimum is 10 business days but then it could take another two weeks to get participants connected with the voice response unit and the Internet, Ms. Mahrdt said.
"I think this is a big deal," she said. "It's significant compared to the industry norm."
The Mount Kisco plan assets had been transferred by Mount Kisco's prior provider, Fidelity Investments, Boston, on May 1, said Ms. Gondolfo.
Mount Kisco replaced Fidelity because of "administrative issues," said Ms. Gondolfo, who joined the company last year.
"Fidelity did not have a grasp of top-heavy plans," she said. "We got scared about the compliance and the discrimination testing."
On the contrary, Fidelity executives say they resigned in February, effective May 1.
"We've had a solid relationship with Mount Kisco since 1994. Fidelity went to great lengths to address the needs of the client over the entire relationship," said a Fidelity spokesman. "However we did not feel comfortable with the compliance and regulatory issues related to plan design changes and implementation that could not be worked out over the past several months."
MassMutual will provide bundled services for the 401(k) plan, which has 13 investment options, Ms. Gondolfo said. They are strategic income, global and international equity portfolios by OppenheimerFunds Inc.; a guaranteed fund managed by David L. Babson and Co. Inc.; equity growth run by American Century; Contrafund and Spartan 500 Index Fund by Fidelity Investments; MassMutual's small-cap growth, MassMutual MAS midcap growth, MassMutual MFS Growth Equity, MassMutual Aggressive Growth and JCC balanced by Janus Capital Corp.; and a self-directed brokerage account.
"We matched with funds that were equal or better performing," she said. "It was a seamless conversion."
Mount Kisco, an independent medical group of more than 70 primary care and specialty physicians, also hired MassMutual to provide Internet access for the plan sponsor and participants, plan-audit support and compliance testing, investment education and planning tools including its online planning tool called The Journey, and statements via the Internet on demand, Ms. Gondolfo said.
This is the third plan sponsor for which MassMutual has performed a 24-hour conversion. Its first no-blackout conversion was for Kaiser Aerospace & Electronics Corp., Foster City, Calif., last fall, but that occurred on a Friday, said Frederick C. Castellani, senior vice president and head of MassMutual Retirement Services.
MassMutual offers no-blackout conversions to plans with at least $20 million in assets.
The quick conversion could lessen a plan sponsor's exposure to fiduciary liability because participants are not out of the market for long, he explained.
The main benefit of a speedy conversion process is participants feel better about the switch if, for example, they can access their loans immediately, said Spectrem's Ms. Mahrdt.
"Once a plan sponsor makes a change (in service providers) so many people feel the pain in a conversion process," she explained.
Service providers are trying to cut down the time it takes to reconcile the records they receive from the prior record keeper, Ms. Mahrdt said. But the speed of the conversion process often depends on the previous record keeper, she added.
"It could be a tie breaker (in winning business), all other things being equal," Ms. Mahrdt said.
For Mount Kisco, the quick conversion meant the plan sponsor had access to the plan and the participants' accounts in 24 hours.
Although the plan was live and participants' accounts could have been accessed through the Internet and by telephone, participants waited a few days to get their personal identification numbers in the mail, Ms. Gondolfo said.
This had the effect of giving Mount Kisco executives a "preview period" in which they could review the records after they were reconciled to verify accuracy, Ms. Gondolfo said.
Software is key
The secret to the quick conversion is the record-keeping software, said Bob Cunningham, MassMututal's director of new business. Two years ago, the company completed a makeover of its record-keeping system that took about three years to complete, he added. MassMutual's new system is faster than most record-keeping systems, Mr. Cunningham said.
It streamlines the transfer process because it can convert data from any other record-keeping system without first having to create code for each computer transfer transaction. So, converting data for each participant is a single-file transfer instead of several, Mr. Cunningham said.
"We were criticized for the first no-blackout conversion because we did it on a Friday," Mr. Cunningham said. "People accused us of having hundreds of people working over the weekend to complete the job."
But he added: "We didn't."
The software has simplified the conversion process, he said.
"We've leveraged our record keeping system and automated the conversion process," he said.