6

For instance, my company will be switching my 401k from Fidelity to Wells Fargo.

When plan providers are changed like this, am I likely able to keep what I currently have invested with the previous plan provider? Or am I going to be forced to transfer everything to the new plan provider?

I also have a loan on my 401k. What might happen to that when they make the switch?

Improve this question
12

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.

Improve this answer
  • 1
    +1 for the comprehensive response. It would seem that there's still the risk of lost gain for the day or two the account is transferring. Obviously, the missing time can be a gain or loss, but I note that yesterday's market gain was 2%+. Given my S&P fund sports a .02% annual expense, there's a bit of risk in the move. Interesting to note (for me, anyway) that YTD, we had 114 up days averaging a .54% gain, and 81 down days averaging -.57%. (i.e. average daily moves were 1/2%) – JTP - Apologise to Monica♦ Oct 11 '13 at 16:20
  • 1
    @Joe they can, potentially, transfer the securities instead of cashing out and repurchasing. In this case no gains are lost. But it depends on whether the new custodian supports the investment choices available at the old custodian – littleadv Oct 11 '13 at 17:58
  • 1
    Given the number of custodians and different investments offered, I'd say it would be rare the new custodian has the same fund selection, but of course, you are right. It's possible. – JTP - Apologise to Monica♦ Oct 11 '13 at 18:49
  • I recently had this same thing take place at my company and it happened almost exactly as described here. (The only real difference was with ours, the default mapping if you didn't provide any was into a target date fund). Great answer! – Matt Oct 16 '13 at 2:50
  • How sure are you that the loan terms don't change? money.stackexchange.com/questions/27886 has a identical question, but focus is on the loan. – MrChrister Feb 3 '14 at 5:06
0

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.

Improve this answer

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.