Payroll, Here Are Your Articles for Wednesday, July 24, 2019
Is this email not displaying correctly?
View it in your browser .
Website Services Resources Contact Us About Us Blog
Share Save

The 3 Points of Switching 401(k) Plan Providers

 

There are many viable reasons for changing your 401(k) plan provider, including these: 

  • Plan fees that are too high. 
  • Lack of scalable solutions.
  • Unsatisfactory customer service.
  • Poor investment choices.
  • Issues with regulatory compliance.

Other reasons may be involuntary — such as your company is undergoing an acquisition or a merger, or your current provider is leaving the retirement plan business. 
No matter the cause, moving a 401(k) plan is a complicated process. Below are three key points to cover:
 

1. Partner with an independent 401(k) consultant.
Many 401(k) plan providers have financial advisors and consultants who deliver in-depth guidance to the provider's clients. But when it comes to switching providers, you may want to obtain counsel from an independent expert. 
The independent consultant can perform an objective assessment of your situation and help you decide whether it's in your best interest to switch. The consultant can also guide you through the transition. 
 

2. Prepare your employees for the change.
Employees like to be in the know when it comes to their finances. So be sure to give them as much notice as possible about the change. Explain why you chose the new provider, the plan changes they can expect and when the change will happen. Address any concerns they have regarding the security of their account funds.
Give employees a heads-up on their responsibilities. For example, tell them to actively check their accounts via the new provider's system, which you will show them how to navigate. They should ensure their investment lineup is correct and promptly review their new account statements. They should also examine the annual fee disclosure notice so they know what's being charged to their account. 
 

3. Anticipate a blackout period.
It takes time for the switch to occur. The time frame depends on how long it will take your old provider to get the records to its successor and the successor's speed in processing and disseminating the necessary information. During this time, employees have limited access to their accounts, hence the term "blackout." 

Plan sponsors are legally required to give participants a blackout notice, which states the reason for the blackout, when the blackout is expected to begin and end, restrictions on employees' rights during the blackout, and whom to contact with questions about the blackout. 

Changing a 401(k) plan provider is an incredibly complex process that goes beyond the scope of this article. For example, if you're changing investment providers, the assets will need to be sold. The proceeds will be wired to the new provider and then reinvested. Also, your new provider should work with your payroll team to ensure accurate setup for payroll processing.

With the change consisting of so many moving parts, it's essential that you do your due diligence before making the switch.

 
Share Save

Your Comments

Payroll Partners
Payroll Partners
817- 226-8111
gary@payrollpartners.com
3001 Medlin Drive Suite 125
Arlington, TX 76015
Friend Me on Facebook
Follow Me on Twitter
Connect with me on LinkedIn
Saved Articles
Comments and Feedback
Refer A Friend
Your Privacy
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Powered by
Copyright © IndustryNewsletters All rights reserved.

This email was sent to: gary@payrollpartners.com

Mailing address: 3001 Medlin Dr. Ste 125, Arlington, TX 76015