How to Switch Your 401(k) Provider

Is your current 401(k) provider charging hidden AUM fees and excessive per-participant charges?

Are they working exclusively with brokers who limit investment options in favor of those with high commission loads? Small business owners who are dissatisfied with their current record keeper’s services or fees or are disappointed in the performance of their investments now have options for a quick and seamless transition to a new 401(k) provider. You do not need to terminate your current plan to do so; instead, your new provider will simply take over the administration of your current plan while implementing any amendments you choose to make.

The truth is, switching 401(k) providers is commonplace and routine. All it takes is a few hours of your time to start offering the competitive, high-performing 401(k) plan you and your employees deserve.

Pitfalls can arise when making a 401(k) switch if you’re not sure what to avoid.

• Continue making contributions

  Don’t stop sending plan contributions to your old provider until you are explicitly instructed to do so. Employee salary deferrals and loan repayments are subject to deadlines. If these deadlines are missed, the contributions must be refunded to participant accounts, and you must note the error on Form 5500.

• Confirm ERISA compliance

  Make sure ERISA compliance is covered for both the prior and the current plan year. If you have not completed nondiscrimination testing or Form 5500 filing for the prior year, doublecheck that your new provider has all the information they need to handle it.

• Consider fees

  Some 401(k) providers (especially insurance companies) charge punitive service termination fees. The new 401(k) provider may also charge a fee for onboarding. You’ll want to keep these fees to a minimum and avoid changing providers constantly to protect the interests of plan participants.

Ultimately, the process of switching is facilitated by your old and new providers without much hassle for you.