Lately we’ve noticed an increased number of employers switching 401k providers with the majority of these moving to more attractive plans for the employees! Maybe they saw this recent article “Lousy 401(k) plans may spark more lawsuits”
As you may or may not know, all 401ks are not created equal. Two key areas where they can differ are quality of fund choices and expenses of these funds. Sometimes the employer pays expenses to a Third Party Administrators and outside financial advisors on behalf of the employee, but sometimes these expenses are passed on to the employee. This is on top of the mutual fund expense ratio that the employee pays.
Given the items above your employer may have decided to switch 401k service providers. If you fall under this category here is what you need to do:
Review the key dates of the transfer:
- The last date to make contribution changes for the upcoming payroll periods
- The last date for requests involving rollovers, loan payments
- Black out or quiet period starts
- Black out or quiet period ends
Determine what your current fund holdings will transfer as to the new provider
Sometimes your current holdings will transfer “in-kind” and no changes will be made. However if your current funds are available at the new provider they will be “mapped” to a similar fund that the new provider offers. Other times your current holdings will transfer all to a target date fund that correlates with your age.
Determine if you contribution % has changed after moving to the new provider
Sometimes you will have a default % contribution unless you login to adjust it. This can also be a good time to revisit your financial plan and potentially increase your % contribution.
During the black out or quiet period your contributions will continue to be made, but you won’t be able to login to your account and make any investment changes or other investment transactions. Therefore it is key to make sure your 401k is setup as you desire before this period begins. As I mentioned with the contribution %, this change in your 401k often creates an opportune time to review your 401k strategy and determine your contribution % and funds used going forward.
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