Thinking About Changing 401(k) Providers?

Five Things You Should Know

Insight By
Mike Iley
Retirement Plans

Offering a competitive benefits package, including a top-notch 401(k) plan, is essential for your company to recruit and retain top talent. Today’s workers highly value employer-sponsored retirement plans: 88 percent of them say that an employee-funded retirement plan is important to them [1]. In addition, eight out of ten new hire candidates consider retirement savings programs offered by prospective employers a major factor in their job search decisions [2].

As a result, you should evaluate your 401(k) plan regularly — at least once a year— to ensure that it continues to be the right fit for your business and employees. For example, if you find during your review that you’re not satisfied with your current 401(k) provider due to high fees, poor investment performance or a lack of service and support, it may be time to consider changing providers. In addition, with many 401(k) providers offering new technology and features, now may be a good time to see if it makes sense to update your existing 401(k) offering by switching to a new provider.

If you’re considering making a change, here are five tips to help you evaluate your current provider. If you decide to switch, we can help make the transition to your new one as smooth as possible:


#1 Before considering new 401(k) providers, carefully review your existing one. Clearly identify why you’re unhappy with your current plan provider and services, then determine the improvements you’d like to see going forward. While your cons list for your current provider may include “fees are too high,” don’t let that be the only reason for switching. Comparing plan providers based on fees alone doesn’t usually reflect the value you’re getting for what you’re paying.

Instead of focusing solely on fees, weigh your current provider — and any prospective ones in the running — based on factors such as:

  • Services and design features
  • Fees and structure
  • Employer and employee customer service and support
  • Investment options
  • Fiduciary support
  • Financial advisor support

#2 Get familiar with the conversion process. Let’s say you decide to change plan providers. After you choose one, what’s next? An experienced provider should do most of the heavy lifting when transitioning your plan to their platform — called a conversion. To start, you’ll need to review and complete paperwork for your current plan to share with your former and new providers.

You also can expect [3]:

  • Your new provider to review your previous plan
  • Preparation and testing to confirm a clean data transfer between providers, including participant account balances and contribution rates
  • Communication to employees about the new plan, the transition process and what to expect
  • Updates to legal and recordkeeping documents to reflect plan changes
  • A blackout period, when participants won’t be able to make changes to their retirement accounts
  • Final statements issued from your former 401(k) provider
  • Creation and activation of participants’ new accounts

#3 Take note of applicable fees. Your current provider may charge you a termination and/or surrender fee when you switch to a new one.These fees can range from a few hundred to a few thousand dollars. Call your current provider to determine their termination and/or surrender fees in advance to avoid any surprises. Your new provider also may charge you to establish the new plan.

#4 You don’t have to stick to your old plan design. Plan sponsors often update their plan designs when switching providers. Most plan documents allow changes to be made at any time, but keep in mind that there may be amendment, regulatory or notice requirements you must meet before these changes become effective. Also, be aware of any timing concerns — for example, investment changes must be aligned with notice and blackout period requirements. Be sure to touch base with your former and new providers to address any potential issues.


#5 Communicate plan changes to your participants. When you make changes to your 401(k), including switching providers, thorough and timely communications to employees will help ensure a smooth and successful transition.  In addition, you’re legally required to provide participants with a blackout notice that includes information about:

  • Key dates — like the last date they can make contribution changes or rollover requests (since they won’t be able to make these changes during the blackout);
  • How long the blackout will last;
  • Restrictions on investment and allocation changes; and
  • Who to contact if they need additional information.

You also should provide employees with information regarding any fund or plan design changes.

It may take some time to review your current plan and, if beneficial, switch to a new provider. Getting the service, support, features and investment options that are best for your plan and participants will make the effort well worth it.

Need assistance? We can help you create an innovative and competitive 401(k)offering to give you an edge when it comes to recruiting and retaining talented employees. And, to ensure a smooth and seamless transition, we can assist with developing employee communications—making sure your employees understand what’s changing and why, how the transition will work and what they need to do.

Contact us today to receive more information!

[1] Transamerica Center for RetirementStudies. 17th Annual Transamerica Retirement Survey. "A Compendium ofFindings About American Workers." December 2016.

[2] Transamerica Center for RetirementStudies. 19th Annual Transamerica Retirement Survey. “Employers:The Retirement Security Challenge.” October 2019.

[3] Human Interest blog. “How to Change Your 401(k) Provider.” April 2017.

Insight By
Mike Iley
Managing Director
Subscribe to our Insights
You have been signed up to receive our insights in your inbox! We'll keep you up-to-date with our best insights and information.
Oops! Something went wrong while submitting the form.
File Number


Retirement Plans
Published on

February 28, 2020

updated on

February 28, 2020


This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.

Recommended Next

Return to Insights Page

Ready to talk to a consultant?

Begin maximizing your benefits.

©2020 LoVasco. All rights reserved.

LoVasco Consulting Group and their agents are presently licensed to sell traditional life insurance in Michigan as a resident producer and numerous other states as a nonresident producer. This site is not intended as an offer to sell securities, which may be done only after proper delivery of a prospectus and a client suitability review. Proper state registration is mandatory prior to conducting business in any state. Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. Check the background of this Firm and/or investment professional on FINRA's BrokerCheck. LoVasco Consulting Group is owned and operated independently from M Holdings Securities, Inc. LoVasco Consulting Group is a member of M Financial Group. Please click here for further details regarding this relationship.