401k Providers Article

Employer Changed 401k Providers, Now What?

Occasionally, I have had people inquire to me about what happens when their company changes 401(k) providers. Usually when such an event occurs, there is a lot of confusion and uncertainty about what is going to happen with their money. To prevent you from making any ill advised decisions, please read more.

401k Change is Not the End of the World

First, I'd like to give some reassurance that just because your company is changing 401(k) providers it is not necessarily a bad thing. Depending on your current investment selections, your new 401(k) may have better options, could be less costly to you, and you may get better service than you did with your previous provider. Obviously, everything I just stated could be the exact opposite, so you never know what could happen.

You have just received the change notice and you’re scared out of your mind because you have no idea what it all means, take a breath. Okay, realize that you don’t have to do anything. Whatever your investment selection was in the current plan should convert over to the new plan. For example, if you were in a balanced model that had you 60% stock and 40% bonds, you should be in the same type model in the new plan, just with different options. This conversion period is what they call the black-out period which means you won’t be able to make any changes to your 401k allocations. So if you want to convert it all to money market because you think the market is going to tank, do it now before it's too late. And if you have some sixth sense of know that this is going to occur, please share with the rest of us so we can follow suit.

But as an employee, you do have a few choices on what you can do.

1. If you are over the age of 59 1/2, you can do what is called an in-service distribution. I wrote about this in a previous post that talks about some of the pros and cons of doing such. If you are absolutely sure that your new 401(k) provider is somebody that you do not want to have your money invested with, then this may be an option that is best suited for you.

2. If you are under the age of 59 1/2, you are pretty much limited on what you can do with your existing 401(k). One option is if you are currently fully maximizing your 401(k) and putting in more than it requires to receive your match, you could then just put in the minimum to get the match and divert the remaining into your own personal IRA, either a traditional or a Roth. (You could not add any money to the new 401k at all, but you should always take the company match no matter what). Doing so would then have the least amount of money in the 401(k), which you are trying to stay out of, and then having more control with your investment selections inside the IRA. Once you then retire or leave your current employer, you will be able to roll over your 401(k) out of the plan that you were trying to avoid.

Unfortunately, under the age of 59 ½ you are limited on your choices. Don’t be too disgruntled in the beginning. Do your research on the new plan and meet with a Certified Financial Planner™ to make sure you are properly diversified

Jeff Rose started his career as a financial advisor with A.G. Edwards & Sons in 2001 out of Carbondale, Illinois. Always excited to meet new people and having a unique interest in the financial markets, being a financial advisor was the perfect fit for Jeff’s career.

In January of 2005, 4 years into his career, Jeff’s National Guard unit out of West Frankfort, IL was called up to support Operation Iraqi Freedom. Acquiring the rank of Staff Sergeant, Jeff served as Squad Leader while conducting military police maneuvers in central Baghdad. Anticipating his return, Jeff attained the Chartered Retirement Planning Counselor designation between mission and duties during his downtime in Iraq. Due to countless prayers, Jeff safely returned home March of 2006.

Picking up right where he left off, Jeff resumed his career as a financial advisor. His goal was to be the “complete package” advisor, wanting to assist in all areas including: investments, insurance, taxes, and estate planning. The next step was to become a CERTIFIED FINANCIAL PLANNER™ practitioner, which he did in November 2007. An individual who has earned the CFP® mark of distinction has met the education, examination, experience and ethics standards established by the Certified Financial Planners Board of Standards (CFP Board).

In December of 2007, Jeff and three others formed Alliance Investment Planning Group LLC.

Jeff resides in Carterville, IL with his beautiful wife Mandy, his new son Parker, and their spoiled pet boxer Klaya.

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