News and Commentary

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

The ongoing consolidation of service providers in the 401(k) market can pose a significant risk to plan sponsors who have a fiduciary duty to act in the best interest of plan participants and their beneficiaries. Consequently, it is crucial for employers to 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 will 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/or investment decisions. This means that plan sponsors must continuously evaluate the performance and costs of outside service providers and make the determination 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:

Reasonableness of administrative costs and individual investment fees;

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. With this information in hand, employers may determine if an RFP from competing providers is required or if they may simply monitor the performance of an existing provider going forward. With this 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 a retirement plan consultant with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. For more information, call (954) 712-8888 or email

Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Olga Ismail is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. The information contained in this report has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Future investment performance cannot be guaranteed. Matching contributions from your employer may be subject to a vesting schedule, please review your retirement plan documents or consult with a financial professional for more information.

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Posted October 14, 2021