Do You Think It Might Be Time To Change Your 401(k) Provider?

You’ve taken the leap to offer a 401(k) plan for your employees. It’s an added expense and takes administrative hours, but you know that it is well worth the increase in employee well-being and the benefits it provides in recruiting.

But how is your 401(k) doing? Is it everything you dreamed it would be, or are you still unsatisfied? If the customer service, fees, or investment performance are leaving you unsettled, it might be time to change your 401(k) provider.

Assess Your Current Provider

First, you need to do an honest evaluation of your current provider. We tend to think that the grass is always greener on the other side, but that isn’t always the case. Before jumping ship with your current provider, you need to judge your experience with them so far. It will also give you a reference point as you shop for a better option. These are the areas you need to take into consideration:

Performance

Retirement investing is long-term, so you can expect to have some bad years. But in spite of those bad years, how do your investments compare to their benchmarks? Are they continually underperforming similar investments? You should also be familiar with the provider’s investment philosophy and make sure you agree with it.

Fees

Perhaps more important than investment performance in the long-term success of your employees’ retirement savings is fees. Performance is unpredictable and has inevitable ups and downs. Fees are concrete and can be compared from provider to provider. You need to understand how your provider’s management, record-keeping, and administrative fees compare with others of their size.

Compliance

Has your provider done their part to keep you compliant with discrimination testing, distribution reporting, and IRS reporting? Have they kept you informed of your responsibilities, such as having an ERISA bond and filing form 5500? You need to know how your provider stands with regulatory agencies and should have in writing that they are an ERISA fiduciary.

Service To Administrators

How has it been working with this provider? Do they communicate well with you and provide support for compliance issues? Are they on top of deadlines and provide accurate information? Does your staff enjoy working with them or do they dread dealing with them?

Service To Employees

Ultimately, the 401(k) plan exists for the sake of the employees. What have your employees’ experiences with the provider been like? If it hasn’t been a positive experience, your employees will not participate in your plan. Your provider should be responsive, knowledgeable, and provide good customer service and practical online tools.

Choose A New Provider

If you conclude that it’s time to make a switch after a thorough evaluation of your current provider, it’s time to start shopping for a new one. A fiduciary best practice is the create and send a Request for Proposals (RFPs) to potential providers.

However, as you gather your information, there are some key things you need to know. Most importantly, you want to find out about fees, cyber security, fiduciary responsibilities, investments, service, and participant access.

You will want to meet in person with the most promising providers based on the information given. In addition to sales people, it’s a good idea to meet with their account relationship manager and implementation specialist. These people will know best if they are a good fit for your company.

It is important to invest the necessary time and effort into making a good decision. It is worth it, and not doing so could cause you problems. Also, make sure to document the entire process, including the reasoning behind your decisions.

Transition Your Plan

Transitioning from one 401(k) plan provider to another is no small feat. There is a lot that has to happen behind the scenes, including a plan blackout.

During the blackout, participants will not be able to access their accounts, make new investments, withdraw funds, or request loans. You want to minimize this, so make sure to get an estimate for how long the blackout will take from both providers (old and new). The length of the blackout will depend upon the number of investments, investment funds and provider’s process, but it should not be excessive.

Other things to expect as you move from one plan to another are:

• Communication to employees about the details and reasons behind the change
• Your new provider’s review of your previous plan
• Preparation and testing to confirm data transfer between providers
• Updates to legal and record keeping documents indicating the new provider
• A blackout, as mentioned above, while the former 401(k) provider runs final participant data
• Issuance of final statements from former provider
• Creation and activation of new participant accounts

Most providers have experienced a transition such as yours before and can help you with the process. Though it is time-intensive to evaluate your current provider and transition to a new one, it is important that your 401(k) plan truly meets the needs of your company and employees.

How We Can Help

If you need help evaluating your current plan provider or looking for a new one, we can do that. At PlanPILOT, we are expert retirement plan consultants and we do this every day. Call us today at (312) 973-4911 or email info@planpilot.com to see how we can leverage our vast experience to find the best fit for your plan and its participants.

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