My employer is switching 401k plan providers. How might this work in practice?
Having gone though this type of event a few times it won't be a problem. On a specific date they will freeze your accounts. Then they will transfer the funds from custodian X to custodian Y. It should only take a day or two, and they will work it around the paydays so that by the time the next paycheck is released everything is established in the new custodian.  Long before the switch over they will announce the investment options in the new company. They will provide descriptions of the options, and a default mapping: S&P 500 old company to S&P 500 new company, International fund old company to international fund new company...  If you do nothing then on the switchover they will execute the mapped switches. If you want to take this an an opportunity to rebalance, you can make the changes to the funds you invest in prior to the switch or after the switch. How you contributions are invested will follow the same mapping rules, but the percentage of income won't change. Again you can change how you want to invest your contributions or matching funds by altering the contribution forms, but if you don't do anything they will just follow the mapping procedures they have defined.  Loans terms shouldn't change.  Company stock will not be impacted. The only hiccup that I would worry about is if the old custodian had a way for you to transfer funds into any fund in their family, or to purchase any individual stock. The question would be does the new custodian have the same options. If you have more questions ask HR or look on the company benefits website. All your funds will be moved to the new company, and none of these transfers will be a taxable event. Edit February 2014: based on this question: What are the laws or rules on 401(k) loans and switching providers? I reviewed the documents for the most recent change (February 2014). The documents from the employer and the new 401K company say: there are no changes to the loan balances, terms, and payment amounts. Although there is a 2 week window when no new loans can be created. All employees received notice 60 days prior to the switchover regarding new investments options, blackout periods. "A few years ago our company switched from Fidelity to a different 401k provider. During the blackout transition, nearly every employee lost a considerable amount of money. The ""Trustee"" advised us that during the blackout he had a right to invest the funds and that the investments lost money."
I use the self-directed option for the 457b plan at my job, which basically allows me to invest in any mutual fund or ETF. We get Schwab as a broker, so the commissions are reasonable. Personally, I think it's great, because some of the funds offered by the core plan are limited. Generally, the trustees of your plan are going to limit your investment options, as participants generally make poor investment choices (even within the limited options available in a 401k) and may sue the employer after losing their savings. If I was a decision-maker in this area, there is no way I would ever sign off to allowing employees to mess around with options. My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options.  Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers.  My current employer offers the same terms, but there's no vesting schedule. "You should call your plan administrator and ask. Few plans allow people to take a ""hardship withdraw"" after leaving because their is no way to pay the funds back since you are no longer working there. The repayment process is done via payroll deduction usually. Also you will most likely be required to withhold 20% for taxes from the 401k. There is no way to defer the taxation unless you take it  next calendar year. You may want to consider doing a rollover into an IRA and taking the w/d and you can do a 60 day rollover. You only get 1 per rolling 12 months now (rather than account do to a change in the rule.) IRA's (not 401k) do give you flexible withholding so you don't have to pay taxes today though they would still be in the tax year based on the calendar date taken out, so if you take it out in 2015 your going to be paying them at the end of this year when you file in April of 2016. Your question seems to be mixing characteristics of both 401k and IRA and while they are similar they do operate very differently." The amount you contribute will reduce the taxable income for each paycheck, but it won't impact the level of your social security and medicare taxes. A 401(k) plan is a qualified deferred compensation plan in which an   employee can elect to have the employer contribute a portion of his or   her cash wages to the plan on a pretax basis. Generally, these   deferred wages (commonly referred to as elective contributions) are   not subject to income tax withholding at the time of deferral, and   they are not reflected on your Form 1040 (PDF) since they were not   included in the taxable wages on your Form W-2 (PDF). However, they   are included as wages subject to withholding for social security and   Medicare taxes. In addition, employers must report the elective   contributions as wages subject to federal unemployment taxes. You might be able to keep this up for more than 7 weeks if the company offers health, dental and vision insurance. Your contributions for these policies would need to be paid for before you contribute to the 401K. Of course these items are also pre-tax so they will keep the taxable amount at zero. If there was a non-pretax deduction on your pay check that would keep the check at zero, but there would be taxes owed. This might be union dues, but it can also be some life and disability insurance polices. Most stubs specify which deductions are pre-tax, and which are post-tax. Warning. If you get the company match some companies give you the maximum match for those 7 weeks, then zero for the rest of the year. Others will still credit you with a match at the end of the year saying if you should get the benefit. It is not required that they do this. Check the company documents. You could also contribute post-tax money, which is different than Roth 401K, for the rest of the year to keep the match going. Note: If you are turning 50 this year, or are already 50, then you can contribute an additional $5,500 As others have pointed out, post-tax dollars are what you'll use.  Just as a quick note, as you'll be using post-tax dollars; in the past, I've refused to take contractor plans because they almost always are inferior to what I've been able to get off the private exchange ehealthinsurance.  A few people have written excellent articles on Get Rich Slowly here and here about them in detail if you want more information. Generally, contractors (and sometimes employees) are offered a few plans (3-4), and this health exchange gives you a little more freedom to pick your plan, which in your situation may help.  It isn't always cheaper, but depending on your needs, you may obtain a better deal. Forgot to add this: this option has also made switching jobs easy as well since I don't have to pay COBRA.  While it depends on the situation, this can sometimes come out significantly cheaper.  For instance, if I were to take the employer health plan next year, I would lose ~$450 a month, whereas the private exchange option is ~$300.  But, if I were to switch jobs, decide to opt for self-employment, or a layoff, the COBRA would be even higher than ~$450. This creates incentive for the employee to contribute more and increases the funds under management of the 401(k) plan. The size of the plan influences the fees that are charged in each of the funds offered. (The more assets under management, the better for those in the plan.) More importantly, 401(k) plans are not allowed to discriminate in favor of highly compensated employees. That discrimination is determined by calculating the average deferrals by your lower compensated employees and comparing them to the average deferrals of your highly compensated employees. If highly compensated employees are saving too much compared to the rest of the pack, they will have some of their contributions returned the next year (with all the tax implications of that). Forcing everyone to contribute 6% to get the full match helps the plan to not fail the discrimination test and protects the highly compensated employees from losing some of their tax deferrals. I question the reliability of the information you received.  Of course, it's possible the former 401(k) provider happened to charge lower expense ratios on its index funds than other available funds and lower the new provider's fees.  There are many many many financial institutions and fees are not fixed between them.  I think the information you received is simply an assumptive justification for the difference in fees. Nobody here really answered your question.  The custodian of the 401k determines what funds and investment options are available within that 401k.  So if they're eliminating company stock as an option then they can absolutely make you sell out of it.    You may be able to do an in service rollover and transfer your funds to an individual ira but that's not particularly common among 401k administrators.   Aside from that I'd ask why do you want to hold company stock anyway?  Generally I'd advise against this as its imposing a ton of risk on your financial future.  If your company tanks you're out of a job, which sucks.  But it sucks even more if your company tanks and your 401k loses a ton of value at the same time.   Edit: I see you asked who benefits as well.  It may just be a situation of no benefit at all.  Perhaps the plan didn't have enough people investing in company stock to make the option cost effective.  Maybe the administrator decided that allowing people to take on that amount of risk was not in their best interest(it's not).  Could be a ton of reasons but it's unlikely the company did so out of greed.  There isn't a lot of financial benefit for them there. The 60 day pay back rule of a distribution your are referring to is a reportable IRS rule so you won't be able to circumvent that by opening your own company with its own 401K and borrowing the funds from there. Failure to accurately report to the IRS leads to fines and possible jail time.    It's not advisable to withdraw from a retirement account but if you really need the money then you can move the funds to a Rollover IRA at the new broker/dealer, or custodian etc. Once you withdraw funds, the plan sponsor has to abide by a mandatory 20% tax withholding on the distribution, you'll be hit with a 10% tax penalty for early withdraw and you'll have to report the distribution as income when you file your personal income taxes. The move from a 401K to a Rollover however is legal and has no tax implications or penalties (besides possible closing fees at the old account) - that is until you decide to withdraw from it assuming you are under age 59 1/2.   Regarding your last point, 401Ks are administered by 3rd parties. You wouldn't be opening up any accounts directly with them necessarily. Best advice? Get a Financial Advisor in your area. I recommend going with an advisor who is backed by independent broker-dealer. Independent broker dealers don't offer their own investment products therefore don't push their advisors to sell you their 'in-house' products like big banks.   Here's a good article on using Rollover funds to start a venture: http://www.ehow.com/how_6789743_rollover-directed-ira-start-business.html  Here is a resource guide direct from the IRS (you can CTRL+F for any specific topics)  http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/401%28k%29-Resource-Guide---Plan-Participants---General-Distribution-Rules One of the strengths of 401K accounts is that you can move from investment X in the program to investment Y in the program without tax consequences. As you move through your lifetime you will tend to want to lower risk by investing in funds that are less aggressive. The only way this works is if there is an ability to move funds. If there were only one or two funds to pick from or that you were locked in to your initial choices that would be a very poor 401K to be enrolled in. On your benefits/401K website you should be able to adjust three sets of numbers: Some have you enter the current money as a percentage others allow you to enter it in dollars. They might limit the number of changes you can do in a month to the current money balances to avoid the temptation to try and time the market. These changes usually happen within 1 business day.  Regarding new and match money they could limit the lowest non zero percent to 5% or 10%, but they might allow numbers as low as 1%. These changes take place generally with the next paycheck. Actually the Fidelity hypothetical example (with same marginal tax rates) is super misleading.  They are putting the money saved up front from the traditional 401k in to at taxable account. Why? If you put the actual money used for the Roth that would be saved into traditional 401k they look the same no matter the timeline (with a hypothetical unchanging tax rate). Check this out.  So there are only two things to consider when choosing traditional vs roth. "If it was me, I would drop out. You can achieve a better kind of plan when there is no match.  For example Fidelity has no fee accounts for IRAs and Roths with thousands of investment choices.  You can also setup automatic drafts, so it simulates what happens with your 401K.  Not an employee of Fidelity, just a happy customer. Some companies pass the 401K fees onto their employees, and all have limited investment choices. The only caveat is income.  There are limits to the deductibility of IRAs and Roth contributions if you make ""too much"" money.  For Roth's the income is quite high so most people can still make those contributions.  About 90% of households earn less than $184K, when Roths start phasing out. Now about this 401K company, it looks like the labor department has jurisdiction over these kinds of plans and I would research on how to make a complaint.  It would help if you and other employees have proof of the shenanigans.  You might also consult a labor attourney, this might make a great class." A few years ago I had been contributing with my employer to a 401(k).  When I then moved abroad, I found it difficult to stay in touch with my 401(k).  The toll-free numbers I had used inside the US, to contact the plan administrators, did not work from overseas. Your employer decides what options you have in the 401k. You can talk to your HR about that. There are requirements for diversity of various types of investments, money-market funds is being one of them. That is the investment account equivalent of cash. While it is not really cash but rather short term bonds - the term is generally very short and the risk is very limited. You can't earn much there, and you can't lose much there - so for all intents and purposes you can treat is as a cash-equivalent. What makes you think anything would change? If they allowed Match money to be distributed tax free, they are missing out on a future tax revenue opportunity.  I think the more likely way they would stick it to us is to sunset the Roth 401(k) all together and make plans go back to the old school pre-tax and after-tax only, where even the earnings on after-tax are taxed at distribution.