401K question

[glimbaugh]

What is the name of your state? MO.

My company has decided to switch 401k providers. I have been told that I MUST move my money to the new funds. The new funds have much higher fees and a lower return. Do I HAVE to move my money?
My Company claims its moving the money because our old vendor was caught in the mutual fund scandal and they claim its a violation of our ethics code yet the new vendor was also caught up in the same scandal but my company is ignoring that fact. I have examined the performance and fees on the new funds and 8 out of 9 of the new funds under performed our existing funds. Also the new funds have higher fees and a new management fee on top of that. Some of the new plans have 50 percent higher fees. We are also getting hit with short term trading fees that the company nor the new provider with pick up the cost for. Is this new plan a breach of Fiduciary duty?

 

[cbg]

Yes, you do have to move your funds. You are limited to the funds provided by the current carrier. You do not have the option of leaving your funds with the old carrier while the rest of the benefit goes to the new one.

 

[glimbaugh]

No

If we had the option to leave the money where it is I would feel a lot better about the whole thing. I am being FORCED to move my money to higher fee funds.
I am also getting the feeling that I might get fired for asking too many questions and for raising objections to the new plan.

 

[cbg]

But you don't have that option. NO 401k plan is going to allow you to hold your money in funds that are no longer available to the plan. The law that permits you to save pre-tax money at all, limits when you can withdraw your money from a pre-tax plan. They're not just being arbitrary, you CANNOT do this.

Unless you have proof that there is something illegal (not just what you feel is unethical but ILLEGAL) in the handling of the plan AND you report that illegality to the US DOL/IRS AND you are fired for such a report, they MAY fire you for your objections.

Of course, once you are no longer employed by them, you can invest your 401k money wherever you please.

 

[glimbaugh]

Wow

thanks for the info. Not what I really wanted to hear but that is why I came here for answers. I wonder how much this happens in corperate america? I wonder why no laws are being drafted to protect american workers from employers who are essentially being ripped off because they are forced to move to what ever plan their employer chooses. I guess I know the answer to that. Because the little guy has no political clout to get laws changed and no big PAC or lobbyist pushing for it.

 

[cbg]

Nothing is stopping you from investing additional funds on an individual basis where you want to invest them. But when you participate in a corporate savings plan, you have to invest where the corporate document says. If you didn't want to participate where the corporate plan is, no one was holding a gun to your head. Having chosen to participate, you are now bound by the rules of the plan just like everyone else is. And your corporate bigwigs are bound by the same laws; they have to use the same funds as well.