News and Commentary

Is it Time for Employers to Reassess their 401(k) Plan Recordkeepers? By Olga Ismail

Consolidation of service providers in the 401(k) market can pose a significant risk to plan sponsors with a fiduciary duty to act in the best interest of plan participants and their beneficiaries. Consequently, employers must stay abreast of industry changes and be prepared to take action, especially when a merger or acquisition results in a new third party taking over the administration or recordkeeping of their 401(k) plan.

Fiduciaries of employer-sponsored 401(k) retirement plans are held to a high standard of conduct when carrying out their responsibilities on behalf of plan participants. Everything they do must be handled with skill and prudence and carefully documented to demonstrate their reliance on these core principles. In fact, employers continue to retain these fiduciary duties even after they hire third parties to manage certain aspects of their defined contribution plans, such as recordkeeping, plan administration and/orc investment decisions. This means plan sponsors must continuously evaluate the performance and costs of outside service providers and determine when a change in providers makes sense.

The due diligence required to evaluate and select appropriate service providers can be quite rigorous and may require plan sponsors to issue requests for proposals (RFPs) from other vendors. Rather than going it alone, employers should rely on the industry knowledge and expertise of their retirement plan advisors to conduct present condition analyses (PCAs) of both their 401(k) plans and their current relationships with third parties to ensure that the services they receive and the costs they incur continue to meet the best interests of plan participants.

A PCA essentially benchmarks the following components of a 401(k) plan and compares them against those offered by other vendors in the market:

When a merger or acquisition in the 401(k) recordkeeping industry results in a deficiency in any of these factors, a retirement plan advisor can also take the lead and shop the market to determine if another provider can deliver similar services better and at a lower cost. This may require employers to seek RFPs from competing providers or simply monitor more closely the performance of their existing provider. With documented detail from retirement plan advisors, employers may ultimately make the most informed and properly vetted vendor selections while ensuring they uphold their fiduciary responsibilities to plan participants.

About the Author: Olga Ismail is the head of Retirement Plan Consulting and a financial advisor with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or

Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.

Olga Ismail is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.

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Updated February 2, 2024