Announcement

Collapse
No announcement yet.

Employer holding 401K funds for one year Michigan

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • honey764895
    started a topic Employer holding 401K funds for one year Michigan

    Employer holding 401K funds for one year Michigan

    Hi,

    I recently accepted a new job that I will begin on January 19. Yesterday I spoke with the HR dept. at my current job about the process of rolling over my 401K funds into either an IRA or my new 401K, and I was told that I cannot do anything with that money until probably January of 2016. This is because our plan administrator does not do the paperwork for former employees' 401K monies until the end of the year in December, and apparently no more than once a year. This includes those who are retiring and wish to cash out, also.

    It says on the paperwork I was given when I put my notice in: "You are eligible to cash out/rollover your account beginning in January - the year after your year of termination. Contact Fidelity at 401K.com or (800) 835-5095 at that time."

    I am disappointed because I can invest that money and make more throughout the next 12 months than if I leave it sitting in an old 401K. Are there any laws governing how long an employer has before they are to "release" the funds to the former employee, whether it is for rollover purposes or retirement? Or are they free to wait as long as they wish, such as in this case? It is my money, after all. I don't understand what right they have to do this.

  • Marketeer
    replied
    As I think I've mentioned previously, I work for another retirement plan provider. Prototype in the context of a retirement plan does NOT mean that the provider offers one plan document for everybody, nor does it mean that you can review the plan document for one Fidelity plan and say that its terms and conditions apply to another Fidelity plan. Prototype distinguishes one type of plan document from the other type, which is called volume submitter. You can google articles about the differences between the two. Essentially, prototype means that it has been approved by the IRS and, thus, that it conforms to IRS regulations.
    Last edited by Marketeer; 01-15-2015, 08:43 AM.

    Leave a comment:


  • cbg
    replied
    Originally posted by Raster
    OP ...as others correctly note...your plan may vary and it is important to read "YOUR " plan ...

    But the Fidelity approved prototype 401(k) plan often used by smaller employers , at least on first review does NOT have any such distribution restriction and it spells out the necessary steps to trigger a distribution ..its on line

    My personal view is that a qualified roll to a IRA may provide greater flexibility and lower costs than many an employer 401(k) but that is sort of your call and your homework.
    First, Raster, you have no idea what model her employer uses and what it says.

    Second, unless you are a licensed broker you have no business making recommendations as to her investments. Particularly not based on the limited information available on a message board.

    That's it. You've stepped over the line one too many times.

    Leave a comment:


  • HRinMA
    replied
    Originally posted by Raster
    OP ...as others correctly note...your plan may vary and it is important to read "YOUR " plan ...

    But the Fidelity approved prototype 401(k) plan often used by smaller employers , at least on first review does NOT have any such distribution restriction and it spells out the necessary steps to trigger a distribution ..its on line

    My personal view is that a qualified roll to a IRA may provide greater flexibility and lower costs than many an employer 401(k) but that is sort of your call and your homework.
    Raster, no "buts" her plan document rules.

    Leave a comment:


  • Betty3
    replied
    The OP can certainly contact the financial service provider if they wish & ask questions but, of course, again - plan document/description rules.

    Leave a comment:


  • cbg
    replied
    Whether you like it or not, Raster, this is the bottom line:

    If the plan document allows for a year's wait for a distribution, or if all distributions are made at the same time which happens to be a year from how, then the ONLY legal time to make a distribution is a year from now. The regs for employer-sponsored plans are very clear on that. Nothing the vendor says can make that regulation go away.

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Plan is sort of key starting point....but the words are not absolute ....odds are if Fidelity is administering it then it is clean starting point...but if somebody did not use an approved prototype plan or get an IRS determination letter it may get murky .

    ( My employer plays some games at funding deferred compensation plans that probably would never pass a smell test ....Im not saying OPs employer is playing games..just that games exist ...)

    BTW I just made a withdrawal from such a plan at said firm just yesterday ...it's really been a while since I read the fine print of the plan..but recall some jargon about it being an approved prototype ..Anyhow the computer system allowed me to make the shifts I desired ...and Ive had no problem with custodian to custodian transfers either and I have more plan descriptions from them than I Could ever read....

    I t may or may not help to ask the plan administrator..but it sure is not hard to ask.

    BTW the investment choices on my plan with Fidelity are pretty darn broad ...no need to rush to withdraw on that score ......Oddly, one of my children has a similar plan set up by a major institution and using A different major financial service provider ..and they put in some rather limited investment choices and some wacky stacked fees....

    Leave a comment:


  • cbg
    replied
    The ONLY source that matters is the plan document.

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Also contact that named financial service provider...I have used that specific firm and have gotten accurate answers even when others have been garbled ....as to plan information ..they do not dispense legal advice, of course. Some employers may not know what is in own plans ....source docuements sure would help....

    Leave a comment:


  • Betty3
    replied
    There again, get a copy of the summary plan document/description & read it.

    Leave a comment:


  • cbg
    replied
    I was wondering if my current employer, the one I am leaving, is allowed to refrain from releasing my money for as long as they wish, which prevents me from putting that money to a place of my choosing (new 401K or IRA).

    No, but they ARE allowed to refrain from releasing the money for the duration of the time it says in the plan document. Which could be for up to a year.

    Leave a comment:


  • hr for me
    replied
    Originally posted by Raster View Post
    Are you talking about your funds deferred or an employer match or both?

    I agree with others , the basic starting point is the SPD ..quote what it says or doesn't say as to withdrawal options/rules upon separation from employment .
    Actually in most cases of termination payouts, it doesn't matter what type the funds are (employee deferrals or employee match), the distribution rules are the same. It's the vesting rules that might be different based on type of money.

    Now it is possible that the distribution rules might be different if the plan allows of hardship withdrawals. Sometimes, those can come from only employee deferrals, but the employer will most likely require some proof of the hardship (foreclosure, medical expenses, college expenses, etc). They might also have different distribution rules for any money that was previously rolled into the plan from another 401k.

    But again, while 401k's can be similar, often they have some differences so no "one size fits all" here.

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Are you talking about your funds deferred or an employer match or both?

    I agree with others , the basic starting point is the SPD ..quote what it says or doesn't say as to withdrawal options/rules upon separation from employment .

    Leave a comment:


  • Marketeer
    replied
    Yes, if it's in your plan documents that you must wait, then you must wait.

    If you are unhappy about your current allocation and think you'll lose money while you wait, I'd suggest calling Fidelity and speaking with a customer service rep about the best allocation for you based on your current age, projected retiremetn age, and risk tolerance.

    Leave a comment:


  • DAW
    replied
    Agreed. Also, there is a separate trustee involved with a 401(k). You can try contacting them directly.

    Leave a comment:

Working...
X