Last Updated on June 18, 2024 by Ben

Changing 401 k Providers

Small companies need a competitive benefits package to attract top talent, and the best 401(k) your company can give is one of them. So you put one in place. However, after a few years, you’ve determined it isn’t the right plan.

It’s possible that the high fees, a lack of customer service or managerial assistance, or poor financial performance have made you reconsider your 401(k) provider. If you’re thinking of switching providers, here are some pointers to help you evaluate your current provider and set up a new plan if necessary.

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Evaluate Your Current 401(k) Provider

The first method is to think about your current service provider and what you like and don’t like. Make a list of what you like, as well as any problems or complaints you’ve had.


Are the costs of recordkeeping, administration, and management reasonable when compared to other firms? It is foremost to do some analysis into a provider’s charges so that you can make an informed decision. The previous head of the Securities and Exchange Commission said that fund expenses significantly impact investors’ returns. He said that this is one of the hardest things to predict, but it is easier to know how fees will affect you.


When it comes to investments, especially retirement accounts, financial planners are always thinking about the long term. There will be years when things don’t go well. But that doesn’t mean your provider can relax and not do their job properly. When considering if a company is a good fit for you, it is important to understand its investment strategy.

What is their philosophy? What kind of risk are they willing to take? Do they have a good track record? Answers to these questions can help you decide if the investment provider’s strategy is right for your company.

The Level of Service for Employees

How responsive is the provider? Do they have a lot of expertise? Can people easily get help with their account and their investments? Are the online tools easy to use and accessible?

This is usually related to how many employees use the benefit. You don’t desire to pay for something that your employees do not even want to use.

The Level of Service for Administrators

How much time does it take to manage your company’s 401(k)? Is the provider proactive and communicative? Will they help you with compliance issues? Can you trust the correctness of their data, and how timely are they around deadlines and pay periods?


Do you understand the different types of IRS reporting, distribution reporting, and non-discrimination testing? Do you know if you need an ERISA bond? Form 5500s? Make sure your provider is in good standing with regulatory agencies and is a fiduciary.

Planning Ahead to Change 401(k) Providers

Larger Companies with Over 100 Employees

If you think that your current provider is not meeting your needs, send out a Request for Proposal (RFP) to other providers. This Sample RFP from 401K Help Center can help you get started. The idea behind the RFP is to get as much information as possible from interested providers. This will assist you in answering important questions about:

  • Fiduciary Responsibilities
  • Investments
  • Service
  • Participant Access
  • Cyber Security
  • Fees

Once you have your proposals, choose the best providers. Meet with them and talk to the people in sales. But also request a meeting with the person who will be responsible for implementing the project or account. People with firsthand knowledge and experience about how their product will or won’t work for your business’ needs are called experts.

Smaller Companies with Fewer than 100 Employees

Even if your company is small, you still need to interview at least three or four 401(k) providers to find the best one for your employees. This will guarantee that you are getting the best possible plan for your workers. When you are talking to providers, make sure to ask them questions about the points above so that you can make an informed decision.

It is important to make the process of finding new providers and reviewing their plans seriously. You have a responsibility to your plan participants to make sure you are making the best decisions for them. Skipping steps can cause serious problems down the road.

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How to Change Providers

If you have decided to switch providers, you will need to tell your old provider. However, you cannot just cancel your old plan and start a new one. Under IRS rules, this transition is known as a 401(k) plan conversion. The conversion process between two providers usually takes 60-90 days. However, the specific steps involved will vary depending on the providers involved. In general, the conversion process can be broken down into five methods.


Transfer Assets to the Latest 401(k) Provider


In the monetary world, an “asset transfer” happens when assets are moved from one place to another. In this step, your outgoing 401(k) provider will hand over all the plan information, including participant balances, loan information, and any necessary documentation. After you tell your current provider that you are going to leave, both providers will work together to transfer the information.

Unfortunately, when you leave your 401(k) provider, you might have to pay some fees. It might not be a lot of fun, but remember that you could make up for those costs with reduced fees and better returns in the long run.


Restate or Amend your Plan Document


Your company’s retirement plan comes with a set of instructions, also known as your plan document. This important piece of documentation explains how your retirement plan works. It covers important details such as:

  • How distributions are handled
  • Contact details for the employer and applicable third parties
  • When employees are eligible to participate
  • Vesting schedule information
  • Employer matching and profit-sharing details

You will require to share your current plan document with your latest 401(k) provider. This will assist them in understanding how your plan works and what you want to do in the future. If you don’t, your new provider will remain the same provisions in your plan document.


Select your Investments


You’ll have to work with your new 401(k) provider to choose the best investments for your business and its employees. It is best to offer a variety of investments to employees. This way, they can choose investments that fit their personality and risk tolerance. You can also ask for environmentally-friendly options or investments that consider ESG factors.

If you automatically enroll employees in your company’s retirement plan, you will also need to choose a “default” investment. This is known as Qualified Default Investment Alternative (QDIA).

If that sounds scary, don’t worry. You don’t require a finance degree or Wall Street pedigree to switch 401(k) providers or design your plan. Many providers offer advisory services with different levels of involvement.


Freeze Retirement Account Changes


Normally, people can update their contributions, make withdrawals, or request loans at any time. But when you are switching 401(k) providers, that kind of activity can make the process more difficult. That’s why you can’t touch your retirement account for a certain period of time if you switch jobs.

Blackout periods can last for up to two months. That’s why companies have to give their employees at least 30 days’ notice before the blackout period starts. This is according to IRS rules.

Make sure you keep track of your compliance requirements, like Form 5500 reporting and nondiscrimination testing. These can be easily forgotten if you switch vendors in the middle of the year. For instance, to file your Form 5500 (which is due in July for the year after you are filing for), you will need to give your new 401(k) provider access to records before you start working with them.


Enroll Employees


Now that you have handed over the retirement plan, it is time to get employees enrolled. You should organize a series of presentations that will cover the features of your retirement plan (like profit sharing or employer matching) and how to use the provider’s technology. In some cases, the new vendor will provide these materials ready-made.

Before your first post-enrollment payroll, you’ll want to make sure that your payroll software is communicating with your new 401(k). If you use Guideline, our team can help you with integrations with leading HR and payroll vendors like Gusto, Rippling Quickbooks Online, and Zenefits.



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Is it a good idea to switch 401 k providers? There’s no one-size-fits-all answer to whether or not changing 401 k providers is a good idea. It depends on your personal financial situation, the fees and investment options offered by your current provider, and how comfortable you feel about transferring your account to a new company. If you decide to switch providers, be sure to do your research to make an informed decision about which company will best meet your needs.

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