Questions to Ask When Switching 401k Providers
For business owners, HR leads, and retirement plan committees moving a 401k to a new recordkeeper. These 20 questions cover conversion timing, blackout periods, data transfer, real fees, and who signs as fiduciary.
The questions
Open any question for the note
What does your conversion timeline look like, week by week, from signed agreement to our first payroll on your system?
Why ask it
A credible answer is a dated calendar with named milestones, since most recordkeeper conversions run 60 to 120 days. Vague ranges usually mean nobody has scoped your plan yet.
How long will the blackout period last, and what exactly can participants not do during it?
Why ask it
Blackout is what your employees will actually feel: no trades, no loans, no distributions, sometimes no balance visibility. Pin down both the number of business days and the specific restrictions.
Who is on the conversion team, and will that same person still be our contact a year after go live?
Why ask it
Many providers staff conversions with an implementation specialist and then hand you to a general service queue. Ask for names, roles, and the point at which ownership changes hands.
Can you send your full fee disclosure with each service priced separately, and show which fees the company pays versus which come out of participant accounts?
Why ask it
A single bundled basis point number hides who is paid what. The 408(b)(2) disclosure should split recordkeeping, custody, advisory, and fund expenses, and say whose money covers each.
Do any revenue sharing arrangements, proprietary funds, or cash sweep spreads offset your recordkeeping fee?
Why ask it
If fund choices subsidize the provider, the investment lineup is no longer a neutral decision and you inherit a conflict to monitor. Ask for the dollar amount of revenue sharing at your current asset level.
What will our current provider charge us to leave, and where in their contract are those deconversion terms?
Why ask it
Incumbents often carry termination fees, final Form 5500 charges, wire fees, and notice windows that make a badly timed exit expensive. Read those clauses before signing anything new.
Will we move onto your plan document, and which of our current plan features change if we do?
Why ask it
Prototype documents quietly reset details like eligibility, entry dates, match true up, hardship rules, and forfeiture use. Ask for a written redline against your existing document.
How will existing balances be mapped to the new investment lineup, fund by fund?
Why ask it
Mapping is a fiduciary decision, not an administrative one, so you need a written mapping schedule showing old fund to new fund before any notice goes out.
Will assets transfer in kind or be liquidated to cash, and how many days will participants be out of the market?
Why ask it
Liquidating to cash means participants miss any market move during the gap, which is the complaint you will hear if markets rise that week. In kind transfers avoid it where the new lineup allows.
How do outstanding participant loans transfer, including balances, amortization schedules, and payroll deduction amounts?
Why ask it
Loans are the item most often broken in a conversion, and a dropped or misamortized loan can become a deemed distribution that is taxable to the employee. Ask who reconciles each loan line.
What data do you need from the prior recordkeeper, and what happens if that file arrives incomplete?
Why ask it
Vesting service history, contribution source detail, beneficiary designations, and prior year compensation are the fields that go missing. You want a named plan for chasing gaps, not a shrug.
How will you carry over Roth contribution basis and each participant's five year holding clock?
Why ask it
If Roth basis does not transfer, participants can be taxed years later on money they already paid tax on. Confirm the receiving system stores basis and first contribution year, not just a balance.
How does your system connect to our payroll provider, and is it a true 360 degree feed or only a file upload?
Why ask it
A one way feed leaves your team hand keying deferral and loan changes, which is exactly where missed deferral errors start. A 360 feed pushes changes back into payroll automatically.
Which fiduciary roles will you accept in writing, 3(16), 3(21), or 3(38), and what stays with us?
Why ask it
Sales language often implies more responsibility than the service agreement actually grants. Make them point to the clause, then write down what the committee still owns.
Who runs compliance testing and files the Form 5500 for the conversion year, and how is that split with the outgoing provider?
Why ask it
A mid year switch creates two sets of records and an easy argument over who tests and who files. Get the split in writing, along with who holds the prior year data that testing depends on.
What notices will participants receive, on what dates, and who drafts them?
Why ask it
Federal rules generally require a blackout notice 30 to 60 days before the blackout starts, plus a fresh QDIA notice if the default fund changes. Late notices are both a compliance problem and a trust problem.
How will you handle uncashed checks, the forfeiture account, and missing or terminated participants during the transfer?
Why ask it
These small odd balances are the ones that get orphaned between systems and resurface years later in an audit. Ask specifically where each pool lands on day one.
What service standards go into the contract, and what remedy do we get when you miss them?
Why ask it
A service promise with no fee credit or exit right attached is marketing copy. Response times, distribution processing days, and error correction windows should be enforceable.
What went wrong in your last ten conversions, and how were participants made whole?
Why ask it
Every conversion has breaks, so a provider claiming a spotless record is either brand new or not being straight with you. Their correction posture tells you more than their pitch deck.
If we decide to leave you in three years, what does that exit look like and what data will you hand over?
Why ask it
Ask the exit question while you still have leverage, because portability of loan histories, vesting records, and Roth basis is far cheaper to negotiate before signing than after.
Running a 401k Provider Switch Without Breaking It
Practical guidance for the conversation itself
Sequence the Switch
Read the incumbent's contract first
Before you shortlist anyone, find the termination clause in your current agreement: notice period, deconversion fees, final filing charges, and whether it auto renews. Signing a new provider and then discovering a 90 day notice window is how plans end up paying two recordkeepers at once.
Pick a quarter end, not a busy payroll week
Most conversions cut over at a quarter end so statements and trust accounting line up cleanly. Avoid overlapping with open enrollment, bonus payrolls, or your Form 5500 deadline, since the same HR person usually owns all of it.
Freeze changes before the blackout
Set a cutoff date after which no new loans, distributions, deferral changes, or fund transfers are accepted, and communicate that date at least twice. Late requests are the items most likely to fall between the two systems.
Put the mapping schedule in writing and keep it
Document the old fund to new fund mapping, the reasoning behind it, and the committee vote that approved it. Mapping is a fiduciary act, so the meeting minutes matter as much as the spreadsheet.
Documents to Request From Both Providers
- The full 408(b)(2) fee disclosure from each candidate, with services priced line by line
- A dollar based fee comparison at your current asset level and at your projected level in five years
- The incumbent's termination and deconversion fee schedule
- A sample conversion project plan with dated milestones and owner names
- The proposed plan document or adoption agreement, redlined against your current one
- Draft blackout and QDIA notices, so you can check the dates yourself
- The service agreement sections naming any 3(16), 3(21), or 3(38) role they accept
- A current SOC 1 or SOC 2 report plus their cyber incident and account restoration policy
- Three references from plans of your size that converted in the last 18 months
What to Verify in the First 90 Days
Reconcile the first two payrolls line by line
Compare deferral percentages, match calculations, and loan repayment amounts against your payroll register for every participant, not a sample. Feed setup errors surface here, and they are cheap to fix in week one and expensive to fix at year end.
Spot check the records that carry history
Pull ten accounts and confirm vesting service, Roth first contribution year, loan amortization end dates, and beneficiary designations came across intact. These are the fields that transfer silently wrong.
Confirm the trust total ties out
The sum of participant accounts on the new system plus anything left behind should equal the old trust balance plus earnings in transit. Ask for a written reconciliation and do not accept a rounding explanation for a material gap.
Red Flags During the Sales Process
- A single all in basis point number with no breakdown of who receives what
- Reluctance to quote the blackout length in business days
- Fiduciary language in the pitch that never appears in the service agreement
- No named owner for loan and Roth basis reconciliation
- Pressure to sign before you have read your current provider's exit terms
- An investment lineup made up mostly of the provider's own funds
- A claim that no participant has ever been harmed in one of their conversions
- Onboarding priced at zero while the exit fee is left open ended