How difficult for company to add a “in-service rollover” option to 401k plan?

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j0nnyg1984
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How difficult for company to add a “in-service rollover” option to 401k plan?

Post by j0nnyg1984 » Sun Jun 28, 2020 1:29 pm

I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks

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ResearchMed
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by ResearchMed » Sun Jun 28, 2020 1:51 pm

j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
I have no idea about how simple, or not, it would be to implement such an option.

However, it may be your employer's preference that "in service" distributions (including rollovers) not be allowed.
If it is already allowed by employer, then it would make sense to find out how to get it implemented.
But you should start there, as many employers do not allow this.
You should be able to find someone at your employer to answer this. Perhaps head of HR? (possibly one or two step up from "compensation and benefits manager"?)

Over the past years, we've taken a variety of issues to the equivalent of VP for HR, if the "benefits" head could not (or would not) handle it. (That includes running interference if the 403b plan isn't providing appropriate services, unfortunately. If VP at employer contacts, say, Vanguard or TIAA, they listen a lot more than if *we* are trying to explain a problem!)

But the first thing is for you to find out whether the "unsure" about whether in-service distributions/rollovers are indeed allowed by your employer at all.

A separate issue is whether the fees are appropriate, but again, that would probably be a discussion with employer, not the vendor.

RM
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redmaw
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by redmaw » Sun Jun 28, 2020 2:30 pm

How hard is it? I would think not very, but that's not why it's unlikely to change.

I'm going to guess the administrator won't like adding it as an option though. If they are charging high fees, and any of it is based on assets in the plan, they won't want you to be able to move assets somewhere else. I would think they would want to restructure fees to make up for the assets leaving. Maybe a higher flat fee, or fees on each transaction leaving the account. Your benefits coordinator probably won't like the new fees, which aren't good for the majority of members.

If your employer has enough employees to negotiate a good plan it might be different, if that were true you shouldn't be paying high fees to begin with.

retiredjg
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by retiredjg » Sun Jun 28, 2020 3:32 pm

j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
It sounds like you might want to move your 401k balance somewhere else. With regards to your "elective deferrals" (the 19.5k you can contribute each year), the law does not allow in service rollovers until you are 59.5 at which point the plan can say yes or no. If that is what you are talking about, you are out of luck....

...except for the exceptions that the CARES Act might offer in response to the COVID 19 pandemic. You might look into that.


The law does allow in-service rollovers of certain "sub-accounts within your 401k - an after tax (not Roth) account is one of them, employer match is another, and anything you rolled into the 401k. Again, your plan can allow or not allow these if I'm not mistaken.

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Nate79
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by Nate79 » Sun Jun 28, 2020 3:51 pm

Would you even be eligible for the common allowed reasons for an in service distribution?

livesoft
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by livesoft » Sun Jun 28, 2020 3:56 pm

Years ago, I had my spouse take a loan from her 401(k) plan that had 2% annual fees and invest the money elsewhere. This kept the 401(k) "space" open and also allowed the money to be paid back quickly in case she lost her job.

So if no in-service rollover is available, but a loan is, then you might consider a loan though loans I think are limited to $50K or 50% of 401(k) balance whichever is lower.
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whyamihere
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by whyamihere » Sun Jun 28, 2020 7:17 pm

j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
Nate79 wrote:
Sun Jun 28, 2020 3:51 pm
Would you even be eligible for the common allowed reasons for an in service distribution?
It's as simple as a boxes being checked if...

-the plan technology/platform at the recordkeeper allows the in service distributions (some old tech doesn't allow it because the accounts are pooled in a way that doesn't make recordkeeping easy),
-the plan sponsor wants to have the feature (many different reasons they could or could not want or they may be ignorant of the decision),
-the plan sponsor wants to pay to amend the plan.

It doesn't matter if the IRS allows the in-service distributions, the plan has to allow it and it doesn't have to.

There's some chance your participant fees are high because the plan sponsor doesn't want to pay for the plan's costs / upkeep. Someone has to pay the piper and the employer is shifting it to you.

Many plans that shift costs from the employer to employees like that don't allow in-service withdrawals as it lowers the fees to the custodian/recordkeeper/vendors of retirement services. The employer may be unaware of the conundrum and that their employees are bearing increasing costs or is aware of it and doesn't care to change. Hell the plan platform may not allow it at all; that would require changing plans entirely.

"Simple" answer from the employer may just be to axe the squeeky wheel instead of oiling it so tread carefully. Good luck, hope this info gives you some insight. There are some recent court cases that discuss a company's fiduciary duty around 401(k) plans and fees but again, they're recent and not yet mainstream.
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Topic Author
j0nnyg1984
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by j0nnyg1984 » Sun Jun 28, 2020 8:23 pm

retiredjg wrote:
Sun Jun 28, 2020 3:32 pm
j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
It sounds like you might want to move your 401k balance somewhere else. With regards to your "elective deferrals" (the 19.5k you can contribute each year), the law does not allow in service rollovers until you are 59.5 at which point the plan can say yes or no. If that is what you are talking about, you are out of luck....

...except for the exceptions that the CARES Act might offer in response to the COVID 19 pandemic. You might look into that.


The law does allow in-service rollovers of certain "sub-accounts within your 401k - an after tax (not Roth) account is one of them, employer match is another, and anything you rolled into the 401k. Again, your plan can allow or not allow these if I'm not mistaken.

Wow. I did a LOT of searching and reading before talking to my HR person about this, prior to making this thread. I looked at a couple different links after reading your post, and what the hell, it seems obvious that I missed those points. Not sure how, but your post made me look for some key words that I guess I skimmed over last time :oops:

Thanks for the education. I’ll email my HR person and tell her to ignore my idiotic question.

Topic Author
j0nnyg1984
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Joined: Sun Apr 24, 2016 9:55 am

Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by j0nnyg1984 » Sun Jun 28, 2020 8:29 pm

whyamihere wrote:
Sun Jun 28, 2020 7:17 pm
j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
Nate79 wrote:
Sun Jun 28, 2020 3:51 pm
Would you even be eligible for the common allowed reasons for an in service distribution?
There's some chance your participant fees are high because the plan sponsor doesn't want to pay for the plan's costs / upkeep. Someone has to pay the piper and the employer is shifting it to you.


"Simple" answer from the employer may just be to axe the squeeky wheel instead of oiling it so tread carefully. Good luck, hope this info gives you some insight. There are some recent court cases that discuss a company's fiduciary duty around 401(k) plans and fees but again, they're recent and not yet mainstream.
Well, it seems from JG’s post that I can’t do it anyways, but I appreciate your response. I edited out most of it.

Yes, the employer is absolutely just shifting the cost to us employees. I have asked numerous times over my ~8 years at this company to be included on the 401k “board,” and have yet to get a positive response. The last time I was told that only managers could be on the board. “I am a manager,” I told her. “Oh, only executives, I meant,” she said 😏

Hey, if they fire me, at least I’ll be able to roll my 401k to my tIRA like I wanted in the first place, yah? 😂

retiredjg
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by retiredjg » Mon Jun 29, 2020 5:58 am

The CARES Act may offer you an opportunity to move some of that money. What is allowed is changing quickly these days - I'd wait for some things to settle down before doing anything.

Sometimes you just can't do anything about a bad 401k plan.

whyamihere
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Joined: Sun Oct 22, 2017 4:55 pm

Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by whyamihere » Mon Jun 29, 2020 6:36 pm

j0nnyg1984 wrote:
Sun Jun 28, 2020 8:29 pm
whyamihere wrote:
Sun Jun 28, 2020 7:17 pm
j0nnyg1984 wrote:
Sun Jun 28, 2020 1:29 pm
I have asked the “Compensation and Benefits Manager” at my employer about the availability of in-service 401k rollover. Our plan docs are not clear and she also is unsure if this is currently available. We have Wells Fargo for our plan administrator, but this was recently sold to Principal - I do not know if this would change anything. Being a pessimist, I’m assuming I will be told that this is not an option.

How difficult is it for a company to include this in the 401k plan? I don’t plan on quickly taking no for an answer if this is something “simple.”

My primary reason for this inquiry is the excessive fees our 401k charges. Almost $950 in “plan and asset” fees for 2019 on a balance of just over 200k, and these go up every year.


Thanks
Nate79 wrote:
Sun Jun 28, 2020 3:51 pm
Would you even be eligible for the common allowed reasons for an in service distribution?
There's some chance your participant fees are high because the plan sponsor doesn't want to pay for the plan's costs / upkeep. Someone has to pay the piper and the employer is shifting it to you.


"Simple" answer from the employer may just be to axe the squeeky wheel instead of oiling it so tread carefully. Good luck, hope this info gives you some insight. There are some recent court cases that discuss a company's fiduciary duty around 401(k) plans and fees but again, they're recent and not yet mainstream.
Well, it seems from JG’s post that I can’t do it anyways, but I appreciate your response. I edited out most of it.

Yes, the employer is absolutely just shifting the cost to us employees. I have asked numerous times over my ~8 years at this company to be included on the 401k “board,” and have yet to get a positive response. The last time I was told that only managers could be on the board. “I am a manager,” I told her. “Oh, only executives, I meant,” she said 😏

Hey, if they fire me, at least I’ll be able to roll my 401k to my tIRA like I wanted in the first place, yah? 😂
That's the spirit! Cynicism in action -- I can appreciate that. Step 1 to accessing 401(k) early is get fired. Check!
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123
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Re: How difficult for company to add a “in-service rollover” option to 401k plan?

Post by 123 » Mon Jun 29, 2020 7:20 pm

One thing you might want to do is request a copy of the "Complete 401K Plan document" from your employer. There can be lots of things in the plan document that your local 401K contact isn't aware of. There can be things that they would prefer not to do so they just shoo you away with a "can't do that" answer. There's a good chance that none of the people on the committee in charge of the plan have ever read the plan document. I've always requested one for every 401K I've participated in. You very well might be the first employee at your company to request one. The document can easily be 100+ pages in length, sometimes multiple hundreds of pages.

There's a good chance that you request for a copy will trigger some "housekeeping". Some plans will have a significant number of amendments to change things. When someone starts looking at their work some management teams decide it's time to get the plan formally rewritten and restated to clean things up.
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