Switching 401(k) providers: A detailed guide for small businesses

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Key Takeaways

  • Regularly assess your 401(k) based on fees, performance, and service. Benchmarking ensures you're getting top value for your investment.

  • Switching involves researching new options, asset transfers, and updating plan documents. A meticulous approach ensures the best fit for your needs.

  • Transitioning between providers requires ERISA compliance. Employers must diligently ensure the switch benefits all plan participants.

As a small business employer, you want to do right by your employees. And part of investing in your staff means offering a competitive compensation and benefits package—including a 401(k) plan. However, there may come a point where your original 401(k) plan just isn’t a good fit. From changing fee structures and poor financial performance to inflexible plan designs and new 401(k) products on the market, there are several reasons why you may want to re-evaluate your choice of a 401(k) provider

Sound familiar? If you’re looking to make a change, this information will guide you through the process of evaluating your current provider and switching to a new 401(k) provider. 

Steps to switching your 401(k) plan provider

Switching providers requires several steps because it’s an important decision to make. Here are some basic steps you need to take before you make the official switch:

  1. Benchmark your current 401(k) provider, including fees, pricing, service, and investment options

  2. Research new provider options

  3. Transfer plan assets to the new provider

  4. Restate the plan document

  5. Select a new lineup of investment choices

  6. Contact your current provider to switch

How to benchmark your current 401(k)

The first step is to compare your current plan to others of the same size and type, in a practice called 401(k) benchmarking. 401(k) benchmarking offers a useful framework to evaluate your provider. Benchmarking also helps plan fiduciaries prove they follow a prudent process when evaluating fees charged to the plan and reduces fiduciary liability. 

Interested in a free benchmark from Human Interest? Click here to get started. 

Benchmarking helps demonstrate that you’re getting the best services for reasonable fees, offering a competitive plan, and achieving the objectives of your participants’ financial goals. Ideally, you should benchmark your 401(k) annually, looking at the following components of your plan.


As the former chairman of the Securities Exchange Commission said, “Perhaps no other issue…has as much direct impact on investors’ returns than the level of fund fees. While fund performance is unpredictable, the impact of fees is not.” Understanding a provider’s fees is an area where it’s worth your time to dig into the details. At the very least, administrative, investment, and transaction fees should track with other plans of similar size — but there are several other things to pay attention to as you compare fees. 

Plans for smaller businesses have traditionally been less cost-efficient because they lack the economies of scale of those at larger businesses. If your business has expanded and you haven’t seen a reduction in fees, it may be a red flag. Your fee disclosure documents should have all the information you need to make this determination as well as benchmarking comparisons. 

When you compare fees, pay special attention to the ones you’re covering as the employer versus the fees your plan participants (employees) are paying, and make sure you’re comparing apples to apples when looking at each. For example, the customer support, recordkeeping, and legal service fees that roll up into administrative costs may be paid entirely by you or passed to employees as flat fees or as a percentage of the assets in the plan (which makes plan sponsors, as plan fiduciaries, responsible for monitoring these fees). Make sure you’re looking at the total cost of each category of fees, as well as total expenditures across the board for both the employer and employees. 

When it comes to plan participant fees, transaction fees for one-offs such as loans and hardship withdrawals may comprise a large percentage, as opposed to lower recurring fees. While it may seem reasonable to pass on moderate to high fees associated with relatively low-frequency transactions to keep employer costs down, consider that there are plans that charge zero transaction fees.

Related articles: 

Plan participants: Are your 401(k) fees too high?


When examining if a 401(k) plan — including your assigned investment fiduciaries — is the right fit for your business, it’s important to know its design and investment strategy. For example, Human Interest Advisors (our registered investment advisor and subsidiary), has an investment philosophy¹ that seeks to use low-cost investment options that we believe can provide requisite long-term expected returns. The goal of any retirement plan is to provide adequate retirement income, so if a plan isn’t growing, we believe that also warrants more scrutiny. Finding a provider that offers plans with diverse and low-cost investment lineups can benefit both you and your employees.

Level of service

It’s important to assess the level of administrative work and time going into managing your company’s 401(k) from your current provider. 

  • Is the provider proactive and communicative? Do they provide support for compliance issues? 

  • Can you trust the accuracy of their data and punctuality around 401(k) deadlines and pay periods? 

  • Are your needs are being met when it comes to IRS reporting and nondiscrimination testing

  • Did they explain that you need an ERISA bond? Form 5500s

  • Is the provider in good standing with regulatory agencies? 

  • Do they serve as a fiduciary

These are all questions you need to ask about your company’s 401(k) provider.

Low-cost 401(k) with transparent pricing

Sign up for an affordable and easy-to-manage 401(k).

Payroll Integrations

If your current provider doesn’t integrate with your payroll provider, it can make life much more difficult for your team. There are several advantages of integrating your payroll with your 401(k) plan—but the potential time-savings an integration offers may top that list. An integrated 401(k) plan can help eliminate many burdens of managing a retirement plan, provide your business with the accuracy and reliability of retirement data, and free up precious resources. 

Business owners should research each provider’s integration options before making any final decisions. For example, Human Interest offers 500+ payroll integrations to streamline administrative tasks.

Tips on researching new providers

When employers consider switching their 401(k) provider, it is crucial to conduct thorough research to ensure they choose the most suitable option for their employees' retirement savings. Selecting the right 401(k) provider requires careful evaluation of various factors, including the provider's offerings, fees, investment options, customer service, and overall reputation. Here are some essential steps we think employers should take when researching new 401(k) providers:

  1. Seek recommendations and referrals: Begin the search by seeking recommendations from trusted sources, such as industry colleagues, financial advisors, or professional networks.

  2. Evaluate plan features and services: Some key features to assess include enrollment and education support, investment options, and access to financial planning tools.

  3. Analyze investment options: Employers should evaluate the investment options being offered. Things to analyze include (but are not limited to): Diversification, fund fees (i.e. expense ratios, 12b-1 fees, short-term trading fees, etc.), risk profiles, and historical performance. 

  4. Review provider fees and expenses: Carefully examine the fee structure of each potential 401(k) provider. Compare costs associated with plan administration, record-keeping, investment management, and any additional services.

  5. Assess provider's technology and tools: Evaluate the provider's online platform and other digital tools to ensure they are user-friendly and provide convenient access to plan information, statements, and account management.

  6. Consider provider's customer service and support: Look for a 401(k) provider that offers reliable and accessible customer service to both employers and participants.

Switching a 401(k) provider is a significant decision that can have a lasting impact on your employees' retirement savings and the organization as a whole. By conducting extensive research and evaluating key factors you can make an informed decision that supports the financial well-being of your workforce.

Switch your 401(k) provider

If you determine that your current provider isn’t meeting your needs, switching will require your plan to undergo a conversion, a process in which the new provider takes over the plan. It’s important to distinguish between conversion and termination because the latter triggers IRS “successor plan” rules that would bar your company from establishing a new plan for one year. A reputable 401(k) provider should be able to proactively manage most of the process.

Unlike larger businesses, smaller companies may not need a formal RFP process to find the best 401(k) plan. But be sure that your process still involves the proper vetting of providers. During demos, sales meetings, and conversations with potential providers, be sure that you’re gathering the important information you need to make an informed decision, including:

  • Fiduciary responsibilities

  • Investments

  • Service

  • Participant access

  • Cybersecurity

  • Fees

Once you choose a new provider, deconversion usually takes 60-90 days, with your efforts taking as little as a few hours at the outset to gather the information your new provider will need to initiate deconversion. From there, the new 401(k) provider should handle processes including asset transfer, document restatement, and participant enrollment. 

Toward the end of the process, the old provider will initiate a blackout period of about 10 business days to ensure all records are correct and investments are liquidated before they’re transferred. Up until the blackout period, all contributions should be sent to the old provider; once the blackout is complete, they should be sent to the new provider.

It’s important to stay compliant with ERISA while transitioning from one 401(k) provider to another. The blackout period is a good time to formally transfer nondiscrimination testing and Form 5500 preparation to your new provider, as your provider at the end of the year will generally be responsible for these items. If you deconvert your 401(k) plan in the middle of the calendar year, don’t be surprised if your new provider asks for some additional items from you or the old provider to complete ERISA compliance documentation; while they generally won’t communicate directly with the old provider, they should let you know what they need from them.

Know your options when comparing 401(k) providers

While it can take some time to find new providers and then review what their plan offers, it’s important to take the process seriously — you have a fiduciary responsibility to your plan participants, and skipping steps can cause serious problems later. Although you’re responsible for this due diligence, the right provider can ease the burden while lowering your costs and providing superior service to you and your employees. 

Want to make the switch today? Get started with a Human Interest 401(k).

Low-cost 401(k) with transparent pricing

Sign up for an affordable and easy-to-manage 401(k).

Human Interest Inc. is an affordable, full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees with investing for retirement. For more information, please visit humaninterest.com. Investment Advisory services are provided through Human Interest Advisors LLC, a Registered Investment Adviser and subsidiary of Human Interest Inc. For more information on our investment advisory services, please visit http://www.humaninterest.com/hia/.

This content has been prepared for informational purposes only, and should not be construed as tax, legal, or individualized investment advice. Neither Human Interest Inc. nor Human Interest Advisors LLC provides tax or legal advice. Consult an appropriate professional regarding your situation.The views expressed are subject to change. In the event third-party data and/or statistics are used, they have been obtained from sources believed to be reliable; however, we cannot guarantee their accuracy or completeness. Investing involves risk, including risk of loss. Past performance does not guarantee future results. 

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment education, and integration with leading payroll providers.

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