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Thinking About Changing 401(k) Providers? Five Things You Should Know.

Thinking About Changing 401(k) Providers? Five Things You Should Know.

April 05, 2024

Thinking About Changing 401(k) Providers? Five Things You Should Know.

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; 91% of workers value a 401(k) or similar retirement plan as an important benefit.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 existing 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

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

1) Transamerica Center for Retirement Studies. 21st Annual Transamerica Retirement Survey of Workers. "Living in the COVID19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations." August 2021. 2) Transamerica Center for Retirement Studies. 20th Annual Transamerica Retirement Survey. “Pre-Pandemic: U.S. Employer
Benefits and Business Practices” December 2020.

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 old and new providers.

You can also 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
• 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
• 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 existing provider to determine their termination and/or surrender
fees in advance to avoid any surprises. Your new provider may also 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 old 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, you’re legally required to provide participants with a blackout
notice that includes information about:
• Key dates – e.g., the last date they can make contribution changes or rollover requests
(since they won’t be able to make these changes during the blackout)
• Blackout length of time
• Investment and allocation restriction changes
• Who to contact for additional information

3 Transamerica Center for Retirement Studies. 20th Annual Transamerica Retirement Survey. “Pre-Pandemic: U.S. Employer
Benefits and Business Practices” December 2020.

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

It may take some time to review your current plan and switch to a new provider, if beneficial. Getting
the 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. Contact us today to receive
more information!

Matthew Daniels, Financial Advisor
Summit Financial Group, Inc.
101 Commerce Blvd. Suite A
Loveland, Oh. 45140

Investment Advisor Representative offering advisory services and securities through Cetera Advisor
Networks LLC, a Broker Dealer and Registered Investment Advisor. Member FINRA /SIPC. Cetera is
under separate ownership from any other named entity. Neither Cetera Advisor Networks LLC nor
any of its representatives may give leagal or tax advice. Summit Financial Group, inc. is located at
101 Commerce BLVD, Suite A, Loveland, Ohio 45140. 513-891-6050
This information was developed as a general guide to educate plan sponsors and is not intended as
authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should
consult your attorney or tax advisor for guidance on your specific situation.
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outside original intent.

Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Please view the Investor Alerts section of the FINRA website for additional information.