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What Are the Steps to Transferring 401k Providers?

Ubiquity Retirement + Savings has been an affordable provider of retirement solutions, including Safe Harbor 401k plans, designed for small businesses, start-ups, and solopreneurs since 1999.

  • Streamlined, flat-fee plans starting at $75/month
  • Easy online set-up and management
  • Flexible investment options
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Every year, you should assess your 401k provider based on cost, participant engagement, investment performance, fiduciary support, and administrative services. There is no reason to stay with a recordkeeper who fails to measure up, as transferring providers is routine, requiring nothing more than a few hours of your time. 

Steps in Transferring to a New 401k Provider

Once you’ve decided on a new provider, you’ll have to inform your current provider of the impending breakup. The IRS successor rules require a handoff from the old provider to the new called a 401k plan conversion. This process can take anywhere from 60 to 90 days.

A 401k plan conversion requires the following steps:

Transfer Assets

The plan assets – information, balances, loan details, and documentation — must be moved from one location to another. Both vendors will work together on a seamless transition. Though the plan itself is changed over — not terminated — the outgoing provider may charge a “service termination fee.” Often, this cost pales in comparison to the inflated fees you were paying or losses due to poor performance.

Amend Plan Document

Your plan’s “owner’s manual” may need updating. You’ll have to share your old plan document with the new provider and consider decisions like:

  • When employees will be eligible to participate
  • What kind of vesting schedule you want
  • How much you’ll match or profit-share
  • Whether employees can take out loans from the plan
  • How distributions will be handled

If you’re happy with the provisions of the plan itself and the type of 401k you have, everything can stay the same.

Select Investments

Next, you’ll work with your broker to determine which investment lineup best suits your business. A variety of stock, bond, and cash investments typically work best, as they allow for a broad range of investment choices and risk levels. If you choose the auto-enrollment plan design, you’ll need to assign a default investment. Most providers offer various levels of advisory service to help you make these kinds of decisions.

Free Account Changes

During the changeover, it is customary to have a “blackout” period, where employees are unable to change investments, take out new loans, or make withdrawals. Amounts paid to existing loans are still credited to the account and contributions are still invested, but reducing account activity is necessary for a few days to a few months until the handoff is complete. The IRS requires you to notify employees of the blackout 30 days in advance. While you’re dealing with paperwork, it’s also a good idea to consider your nondiscrimination testing and Form 5500 filing requirements, as these are easily overlooked when switching vendors midyear.

Enroll Employees

Once the new provider takes charge, you may want to organize a series of presentations showcasing the plan’s new features (if there are any), and educate employees on how to use the provider’s technology. Typically, the vendor provides you with all the materials you need. Before the first payroll is processed, you’ll need to make sure your payroll software is fully integrated with the 401k provider’s software.

Transferring 401k providers can seem almost effortless with the right vendor. Ubiquity’s 401k plans have helped small business employees contribute over $2 billion towards their retirements since 1999. Contact us to learn how we can help your company for a low flat-fee.

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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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© 2020 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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