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I have worked for a large multinational in the US for many years and whilst working with them, I have built up a sum of money in a 401(k) with Fidelity. However, about 2 years ago, my division within the company merged with another company to create a joint venture, which is still majority-owned by the first company.

This new joint venture switched to using a different 401(k) provider at the start of this year (2019) (which coincided with their benefits package splitting off from the larger company). Since then, I have been making 401(k) contributions into the account with the new provider, but it seems I am unable to continue contributing to the 'old' account.

Because of this, I was interested in rolling over the 'old' 401(k) account into an IRA, so I would have fewer trading restrictions and more investment options. However, I have been told by Fidelity that the 401(k) is considered to be in a 'protected' status, because I am still working for a subsidiary of my original company. So, because of this, I am not able to roll it over.

The 'old' 401(k) account is not 'frozen', in the sense that I can still rebalance it (within the normal excessive trading restrictions); however, I am not able to roll it over into an IRA.

To me, this seems rather strange. I would think that a 401k should fall into one of two categories: either it's active with my current employer and I can make contributions into it, or it's from a former employer and I can roll it over. It seems odd that I should have a 401k where I am not able to do either of those things.

So, my questions are: is this normal? Is it right? Is there anything I can do about it (short of leaving the company entirely)?

  • 2
    In the meantime, have you been contributing to the "different 401(k)"? – RonJohn Jun 13 at 12:25
  • @RonJohn yes, I have been contributing to the new 401(k) with the new provider. The switchover of providers happened at the start of this year, so I have been unable to make contributions into the 'old' 401(k) since then. I will edit my question to clarify. – Time4Tea Jun 13 at 13:44
  • In this case, I'd be mildly unhappy, and consider that I can't rollover the "old" 401(k) because I'm still employed by the old company, just with another layer of bureaucracy between me and Old Company. – RonJohn Jun 13 at 13:55
  • @RonJohn ok, I guess that makes sense. Perhaps this should be a separate question, but is this similar to what would happen if I was working for a company and they just decided to change 401(k) provider (without the spin-off joint venture aspect)? – Time4Tea Jun 13 at 13:59
  • That happened at my company this past January, and they moved the funds from the old provider (Fidelity) to the new one (ABA Voya). – RonJohn Jun 13 at 14:02
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That should be normal.
Even if you stay with the same company, they might simply change their 401k provider, every year if they want to, because it's cheaper or whatever reason; and you would collect a series of accounts that are all 'from your current employment' and therefore 'not eligible for rollovers'.

  • Ok, thanks. It makes sense, when you put it in this context. – Time4Tea Jun 13 at 15:58
  • The one time I worked for a company at the time of a 401(k) provider change, everything was rolled over. – Andrew Lazarus Jun 14 at 1:26
  • @AndrewLazarus ,it sure can. It depends on how they make their contracts, with the new and with the old provider. – Aganju Jun 14 at 5:44
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Yes, Normal. There are situations like yours, either a takeover, or a spinout of a division of a company into a separate entity, in which this occurs.

In the cases I've seen, this was not an opportunity to rollover the 401(k) into one's IRA. Employment was continuous (for most, for some it was a matter of being 'unemployed' for a matter of minutes or hours, but this was semantics) and even though the employer was different, the 401(k) move was an automatic process.

On average, a very small percent of 401(k) account holders are trying to perform a transaction in any given week, the account, unfortunately, is treated as a 'set it and forget it'. This is good if the setting is high enough to get he full match, and perhaps hit the annual limit, but bad if it misses these targets. Also bad, if the mix of investments strays from the best allocation. Either way, the 'freeze' to your account will lift soon, it's typically brief, 2-4 weeks, at most, and you'll be able to adjust it to the new fund choices.

Normal? Yes. Right? Yes, it's part of the process.

  • Thanks, this is very helpful. Although, the account isn't 'frozen', as in I am still able to make transactions. Also, I still seem to have access to the same funds that I did previously - I haven't heard anything about the fund choices changing (god, I hope not, as the new ones are terrible!). By 'in limbo', I meant that I can't make new contributions into it or roll it over. Sorry if I was unclear on those points. – Time4Tea Jun 13 at 11:37
  • No problem! Frozen transactions are possible, and the account holder freaks out, glad that's not your situation. The only impact is that contributions are suspended for a couple pay periods. – JTP - Apologise to Monica Jun 13 at 11:41
  • 1
    Joe, you mention that the freeze is typically brief, 2-4 weeks, but OP's freeze has been two years. – RonJohn Jun 13 at 12:24
  • ? Thanks, I missed that. It seems he doesn't have the typical freeze I referenced, but a 401(k) with suspended deposits. We need more details from OP, which I see you requested. – JTP - Apologise to Monica Jun 13 at 12:27
  • @RonJohn I have edited my question to try to clarify those points. – Time4Tea Jun 13 at 13:55

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