Restricted access to retirement accounts

[Macawi]

My employer switched retirement account providers from lets say Voya to Fidelity. I have a significant investment in the only "stability of principal" account offered. All other retirement funds either invested in stocks or bonds or both, which at the time I made the investment I did not want. Summary of the fund below:

"Assets are invested in conservative investment options that seek - but not necessarily guarantee - to hold the principal value of an investment stable through all market conditions. These options may credit a stated rate of return or minimum periodic interest rate that may vary. Dividend rates and income levels fluctuate with market conditions and are not guaranteed. These investment options, including money market portfolios, are neither insured nor guaranteed by the U.S. government."

Now that I'm logging into my new account, it has become clear that not all my assets transferred. After several calls I figured out the issue. In the fine print of the fund there is a section that has the following disclosure:

"Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: • One-fifth of the value in the Voya Fixed Plus Account III as of the business day VRIAC receives the withdrawal request in good order reduced by the amount, if any, transferred (including transfers made to issue a loan), withdrawn, or used to purchase annuity payments during the prior 12 months (VRIAC reserves the right to reduce the amount available by deducting any amount withdrawn under a systematic distribution option); then • One-fourth of the remaining amount 12 months later; then • One-third of the remaining amount 12 months later; then • One-half of the remaining amount 12 months later; then • The balance of the value in the Voya Fixed Plus Account III 12 months later."

I know this is very anti-boglehead and I do not want this to be a discussion on market timing but my plan for this money was to put it back into the market at some point, so it is very frustrating to me that access to my own retirement funds is being restricted by the provider. (For those who's eyes glazed over reading the fine print my money gets transferred to Fidelity essentially 20% a year over 5 years). The money that is left at Voya cannot be invested in a different Voya investment in the meantime. Basically my money is being held hostage. My questions for the forum are as follows:

1) Is this even legal and does a restriction like this conform with ERISA and/or other laws that cover retirement accounts?
2) Do I have any other options to get access to this money sooner?
3) Has anyone else ever dealt with a situation like this before?

[delamer]

I don’t understand this:

All other retirement funds either invested in stocks or bonds or both, which at the time I made the investment I did not want.

[exodusNH]

My employer switched retirement account providers from lets say Voya to Fidelity. I have a significant investment in the only "stability of principal" account offered. All other retirement funds either invested in stocks or bonds or both, which at the time I made the investment I did not want. Summary of the fund below:

"Assets are invested in conservative investment options that seek - but not necessarily guarantee - to hold the principal value of an investment stable through all market conditions. These options may credit a stated rate of return or minimum periodic interest rate that may vary. Dividend rates and income levels fluctuate with market conditions and are not guaranteed. These investment options, including money market portfolios, are neither insured nor guaranteed by the U.S. government."

Now that I'm logging into my new account, it has become clear that not all my assets transferred. After several calls I figured out the issue. In the fine print of the fund there is a section that has the following disclosure:

"Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: • One-fifth of the value in the Voya Fixed Plus Account III as of the business day VRIAC receives the withdrawal request in good order reduced by the amount, if any, transferred (including transfers made to issue a loan), withdrawn, or used to purchase annuity payments during the prior 12 months (VRIAC reserves the right to reduce the amount available by deducting any amount withdrawn under a systematic distribution option); then • One-fourth of the remaining amount 12 months later; then • One-third of the remaining amount 12 months later; then • One-half of the remaining amount 12 months later; then • The balance of the value in the Voya Fixed Plus Account III 12 months later."

I know this is very anti-boglehead and I do not want this to be a discussion on market timing but my plan for this money was to put it back into the market at some point, so it is very frustrating to me that access to my own retirement funds is being restricted by the provider. (For those who's eyes glazed over reading the fine print my money gets transferred to Fidelity essentially 20% a year over 5 years). The money that is left at Voya cannot be invested in a different Voya investment in the meantime. Basically my money is being held hostage. My questions for the forum are as follows:

1) Is this even legal and does a restriction like this conform with ERISA and/or other laws that cover retirement accounts?
2) Do I have any other options to get access to this money sooner?
3) Has anyone else ever dealt with a situation like this before?

Yes, this is legal and was in the fine print of the fund. They don't always exercise the option, but because they've invested in the same types of bonds that you and I can, they've suffered the same losses we would have. The difference is that they wrap the bonds with insurance contracts to maintain a stable value. By restricting the withdrawals, they're able to mitigate the losses.

You're lucky that they didn't allow you to move it by making a market value adjustment. You'd have wound up taking a 15% haircut.

With that said, you could try requesting a rollover yourself. When my funds were locked in a similar fashion due to a provider change, I could have requested the rollout. This is different than the sponsoring company making the move.

You need to be very careful about the market value adjustment (MVA) though.

Does your company employ an advisor to manage the 401k? If so, I would call them and see if you, as the beneficiary, are able to request the funds.

[aristotelian]

Sounds similar to TIAA Traditional Annuity which requires 9 years to liquidate. You're getting off easy! Unfortunately these things happen when you get your retirement plan from an insurance provider instead of investment brokerage.

[anonenigma]

"Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments "

I think that you misunderstand. This language means that individuals can move their funds all at once, but if the plan decides to withdraw the funds of all plan participants in that investment option, it will be paid out over five years. When my former employer's plan switched from TIAA to Voya (TIAA didn't submit a renewal bid), the same thing happened - account holders could decide individually to keep their money in TIAA Traditional or move it to another investment option. New payroll deductions could not be directed to the TIAA Traditional. If my employer had decided to move the money of all plan participants from TIAA Traditional to Voya's stable value fund, it would have either been costly or enacted over nine years.

Market Value Adjustments can cut both ways - can't recall exactly how they respond to interest rate conditions, but when my employer switched from VALIC to TIAA years ago, I received a nice bonus due to the MVA.

[Macawi]

401k advisor has said my only way to have access the funds is separating from my employer. Also said the only reason this is happening is my employer broke the contract with Voya with 1 year remaining so that is why Voya is restricting the transfer of everyone's funds out of the fixed plus account. I thought there were laws against predatory practices by retirement account providers. This sure seems predatory to me.

You guys are telling me I should be happy there is no MVA and that the waiting period is not 9 years. However this fund was not advertised as an annuity so to compare it to TIAA Traditional is not fair. As I showed in my original post, this fund was advertised as a stable value fund that invested in money markets and it did not advertise that it had significant trading restrictions.

[MrJedi]

All stable value funds that I've seen have liquidity restrictions like this. Trying to maintain a stable value is exactly one of the reasons for the restriction.

If you want to look up more, you can research book value vs market value of stable value funds and also liquidity events that can result in a breach of contract. The other option to a liquidity event/contract breach is to liquidate at market value and take a loss (similar to breaking the buck on a money market fund, stable value funds are usually very much like slightly more aggressive money market funds with tighter liquidity gates).

[sycamore]

It sounds legal and legit to me. Is it frustrating? Yes. C'est la vie.

You can make the situation better by making some slight adjustments to your portfolio. You say you wanted to move the SV money back into the stock market.

And the SV money will only become available at, say, $X per year for the next five years.

And you also have bond investments elsewhere.

And presumably you have a target asset allocation for your whole portfolio.

So why not sell (some of) your bond investments to buy stocks, and consider the locked-up SV money to be your bond allocation?

Sure, SV is not the same as "bonds" but it may be close enough, at least to to tide you over until your SV assets transfer out of Voya.

What matters most is meeting your portfolio AA target, not so much which account holds the bonds.

[Katietsu]

This should have been disclosed somewhere in the documentation you received before the transition. It sounds like you would have been able to move the funds out of the stable value account at that time to avoid this situation. I know that I have transferred funds within a retirement account before a change in the record keeper because of differences in how they would be handled in the transition.

[retiringwhen]

This thread and the fund restrictions are an example of the fact that there is no free lunch with fixed income. Most people don’t realize the constraints that must be placed upon SV funds to allow them to keep a stable $1 price AND return competitive returns. I agree, better disclosure is key and one thing I have learned is that DOL managed retirement plans such as 401Ks seem to have much more opaque disclosure, even at Vanguard. It seems like a bad combination.

After reading what I could find about my plan’s SV and asking questions of the administrator, I have stopped using them for any significant Fixed Income. They are just not worth it.

OTOH, The SEC has worked major regulatory changes on Money Market funds to make the risk trade-offs much more clear, even to the point of requiring names and classes of funds to be openly defined and comparable across Fund Providers. The investor still needs to perform due diligence, but the information is much more easily found. Heck, just yesterday Fidelity sent out a general newsletter describing the risk profiles of their money market funds.

[Macawi]

This should have been disclosed somewhere in the documentation you received before the transition. It sounds like you would have been able to move the funds out of the stable value account at that time to avoid this situation. I know that I have transferred funds within a retirement account before a change in the record keeper because of differences in how they would be handled in the transition.

Thank you KatieTsu. I agree this should have been disclosed. Why should I be held responsible for a contract breach between my employer and retirement plan provider?

[ResearchMed]

OP,

Perhaps I missed it, but before the move, did you have unrestricted access to the money in the "stability of principal" account?
Or were there already some restrictions about removing money?

Often those "stable value" funds have some liquidity limitations, which is part of what allows them to offer the "stability" they provide.

RM

[Macawi]

OP,

Perhaps I missed it, but before the move, did you have unrestricted access to the money in the "stability of principal" account?
Or were there already some restrictions about removing money?

Often those "stable value" funds have some liquidity limitations, which is part of what allows them to offer the "stability" they provide.

RM

I would have been able to exit out of my position prior to my company’s migration out of voya. I was not notified of this possibility.

[UpperNwGuy]

OP,

Perhaps I missed it, but before the move, did you have unrestricted access to the money in the "stability of principal" account?
Or were there already some restrictions about removing money?

Often those "stable value" funds have some liquidity limitations, which is part of what allows them to offer the "stability" they provide.

RM

I would have been able to exit out of my position prior to my company’s migration out of voya. I was not notified of this possibility.

You would have been able, but would you have done it?

[exodusNH]

401k advisor has said my only way to have access the funds is separating from my employer. Also said the only reason this is happening is my employer broke the contract with Voya with 1 year remaining so that is why Voya is restricting the transfer of everyone's funds out of the fixed plus account. I thought there were laws against predatory practices by retirement account providers. This sure seems predatory to me.

You guys are telling me I should be happy there is no MVA and that the waiting period is not 9 years. However this fund was not advertised as an annuity so to compare it to TIAA Traditional is not fair. As I showed in my original post, this fund was advertised as a stable value fund that invested in money markets and it did not advertise that it had significant trading restrictions.

It's not predatory. You agreed to it when you put your money in that account. There was definitely something buried in the paperwork stating that withdrawals were or could be restricted.

My employer was in a similar situation. Empower enforced the put on the SVF for 12 months.

However, working with the plan advisors it WAS possible, as an individual, to request the transfer to the new plan. You might not have as good of an advisory group as we had. You're not taking a distribution, but rather doing a 401k to 401k transfer.

[123]

..."Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: ...

The individual plan participants have no control over the decision of their employer to change plan providers. Since it was the action of the employer (to change plan providers) that has restricted access by the employees to their funds the employer has effectively barred employees from effectively managing some of their investments for five years (I assume they can't switch to other holdings in the old Voya plan). The employer should have an obligation to make the employees whole in the their ability to manage their own money.

The employer can negotiate for the immediate release of the held funds. The employer should bear the burden of the business error of selecting the Voya plan in the first place. Voya might negotiate hard, the employer might have to make up any loss Voya would suffer by complete release of all held stable value money and who knows what else.

Employees should not be made to suffer because of bone-headed business decisions of their employer. The employer is obligated to act as a fiduciary in the handling of the 401K accounts. The bone-headed decision was the employer's acceptance of the Voya plan terms in the first place years ago. Any costs to immediately exit the plan in full are the responsibility of the employer. Anything less than a full and complete immediate exit would seem to be an abdication of their fiduciary responsibilities.

Edited to add:

The employer's action that caused the employees funds to be restricted could likely be a violation of the terms of the 401k plan (the OP should request a full copy of the actual plan from the employer, don't be satisfied by just the typical summary plan description or "how to" booklet. The plan exists normally separate and apart from the relationship to the custodian. I suspect the restriction on access to employee funds may be a violation of ERISA regulations. It is possible that other investment options could soar in value in the 5 year lock-up period. Potentially a great class action case could be made against the employer for abdication of fiduciary responsibilities, damages would be the difference between the stable value option earnings and the highest earnings in the other plan options over the 5 year period.

[Macawi]

OP,

Perhaps I missed it, but before the move, did you have unrestricted access to the money in the "stability of principal" account?
Or were there already some restrictions about removing money?

Often those "stable value" funds have some liquidity limitations, which is part of what allows them to offer the "stability" they provide.

RM

I would have been able to exit out of my position prior to my company’s migration out of voya. I was not notified of this possibility.

You would have been able, but would you have done it?

yes obviously - the point of this thread is to figure out how to have unrestricted access to my money.

[Macawi]

..."Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: ...

The individual plan participants have no control over the decision of their employer to change plan providers. Since it was the action of the employer (to change plan providers) that has restricted access by the employees to their funds the employer has effectively barred employees from effectively managing some of their investments for five years (I assume they can't switch to other holdings in the old Voya plan). The employer should have an obligation to make the employees whole in the their ability to manage their own money.

The employer can negotiate for the immediate release of the held funds. The employer should bear the burden of the business error of selecting the Voya plan in the first place. Voya might negotiate hard, the employer might have to make up any loss Voya would suffer by complete release of all held stable value money and who knows what else.

Employees should not be made to suffer because of bone-headed business decisions of their employer. The employer is obligated to act as a fiduciary in the handling of the 401K accounts. The bone-headed decision was the employer's acceptance of the Voya plan terms in the first place years ago. Any costs to immediately exit the plan in full are the responsibility of the employer. Anything less than a full and complete immediate exit would seem to be an abdication of their fiduciary responsibilities.

I agree with your take - seems like most people so far do not seem to agree with us.

[exodusNH]

..."Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: ...

The individual plan participants have no control over the decision of their employer to change plan providers. Since it was the action of the employer (to change plan providers) that has restricted access by the employees to their funds the employer has effectively barred employees from effectively managing some of their investments for five years (I assume they can't switch to other holdings in the old Voya plan). The employer should have an obligation to make the employees whole in the their ability to manage their own money.

The employer can negotiate for the immediate release of the held funds. The employer should bear the burden of the business error of selecting the Voya plan in the first place. Voya might negotiate hard, the employer might have to make up any loss Voya would suffer by complete release of all held stable value money and who knows what else.

Employees should not be made to suffer because of bone-headed business decisions of their employer. The employer is obligated to act as a fiduciary in the handling of the 401K accounts. The bone-headed decision was the employer's acceptance of the Voya plan terms in the first place years ago. Any costs to immediately exit the plan in full are the responsibility of the employer. Anything less than a full and complete immediate exit would seem to be an abdication of their fiduciary responsibilities.

Edited to add:

The employer's action that caused the employees funds to be restricted could likely be a violation of the terms of the 401k plan (the OP should request a full copy of the actual plan from the employer, don't be satisfied by just the typical summary plan description or "how to" booklet. The plan exists normally separate and apart from the relationship to the custodian. I suspect the restriction on access to employee funds may be a violation of ERISA regulations. It is possible that other investment options could soar in value in the 5 year lock-up period. Potentially a great class action case could be made against the employer for abdication of fiduciary responsibilities, damages would be the difference between the stable value option earnings and the highest earnings in the other plan options over the 5 year period.

You can believe what you'd like, but I am certain that the prospectus specifically covers this case.

OP is welcome to make a complaint to their department of labor, but I'm certain what was done was legal.

[student]

..."Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: ...

The individual plan participants have no control over the decision of their employer to change plan providers. Since it was the action of the employer (to change plan providers) that has restricted access by the employees to their funds the employer has effectively barred employees from effectively managing some of their investments for five years (I assume they can't switch to other holdings in the old Voya plan). The employer should have an obligation to make the employees whole in the their ability to manage their own money.

The employer can negotiate for the immediate release of the held funds. The employer should bear the burden of the business error of selecting the Voya plan in the first place. Voya might negotiate hard, the employer might have to make up any loss Voya would suffer by complete release of all held stable value money and who knows what else.

Employees should not be made to suffer because of bone-headed business decisions of their employer. The employer is obligated to act as a fiduciary in the handling of the 401K accounts. The bone-headed decision was the employer's acceptance of the Voya plan terms in the first place years ago. Any costs to immediately exit the plan in full are the responsibility of the employer. Anything less than a full and complete immediate exit would seem to be an abdication of their fiduciary responsibilities.

Edited to add:

The employer's action that caused the employees funds to be restricted could likely be a violation of the terms of the 401k plan (the OP should request a full copy of the actual plan from the employer, don't be satisfied by just the typical summary plan description or "how to" booklet. The plan exists normally separate and apart from the relationship to the custodian. I suspect the restriction on access to employee funds may be a violation of ERISA regulations. It is possible that other investment options could soar in value in the 5 year lock-up period. Potentially a great class action case could be made against the employer for abdication of fiduciary responsibilities, damages would be the difference between the stable value option earnings and the highest earnings in the other plan options over the 5 year period.

You can believe what you'd like, but I am certain that the prospectus specifically covers this case.

OP is welcome to make a complaint to their department of labor, but I'm certain what was done was legal.

I agree. This is common. Such a "stable" value fund often comes with this type of restrictions. It is like buying a 5-year CD. If you break it, there is a penalty. Now the question is whether such a restriction was disclosed. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened.

[123]

I agree. This is common. Such a "stable" value fund often comes with this type of restrictions. It is like buying a 5-year CD. If you break it, there is a penalty. Now the question is whether such a restriction was disclosed. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened.

It was the action of the employer that triggered the invocation of the 5 year restriction, otherwise there was no restriction on the stable fund. Why should the employees be punished for an action by their employer which they could not control?

The employer could have initiated a campaign prior to the switch to advise employees of the potential consequences of continued holding of stable value positions.

I think the employer did not act in the best interests of the employees and failed in their fiduciary responsibilities.

[student]

I agree. This is common. Such a "stable" value fund often comes with this type of restrictions. It is like buying a 5-year CD. If you break it, there is a penalty. Now the question is whether such a restriction was disclosed. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened.

It was the action of the employer that triggered the invocation of the 5 year restriction, otherwise there was no restriction on the stable fund. Why should the employers be punished for an action by their employer which they could not control?

The employer could have initiated a campaign prior to the switch to advise employees of the potential consequences of continued holding of stable value positions.

I think the employer did not act in the best interests of the employees and failed in their fiduciary responsibilities.

I think it depends on whether the statement "Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments" or other similar warning was given to the OP when the account was opened. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened. OP needs to check that.

[123]

Why would the employer accept such a condition in a custodian agreement which could disadvantage many employees?

How would that be consistent with their fiduciary responsibilities?

There can be a wide range of employees that participate in a 401k plan, including many who may lack even a high-school education.

[student]

Why would the employer accept such a condition in a custodian agreement which could disadvantage many employees?

How would that be consistent with their fiduciary responsibilities?

There can be a wide range of employees that participate in a 401k plan, including many who may lack even a high-school education.

It is not uncommon for stable value fund to have restricted access right from the start. This is how stable value funds maintain higher interest rate even during low rate environment. There is no free lunch. (TIAA famously have two versions and the illiquid one pays higher interest rate than the liquid one but both pay at least 3% even in the last decade.) We do not know the negotiation leading up to the final plan. For example, OP's company could have negotiated for lower ER across the board and the restriction was part of the compromise. Based on the information provided, I do not see an issue as long as the restriction was disclosed when the account was opened. You do have a point regarding participants' education level. This reminds me of a case when workers complained the 401k plan has too many choices. The seventh circuit sided with the company based on the fact that the plan already include low cost funds, and drew a bright line. The Supreme Court disagreed and said no such bright line exists. I think the Supreme Court's decision implies "who the participants are" is a variable. I don't think we have enough information here to say OP's employer did not meet its fiduciary responsibilities.

[retiringwhen]

..."Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: ...

The individual plan participants have no control over the decision of their employer to change plan providers. Since it was the action of the employer (to change plan providers) that has restricted access by the employees to their funds the employer has effectively barred employees from effectively managing some of their investments for five years (I assume they can't switch to other holdings in the old Voya plan). The employer should have an obligation to make the employees whole in the their ability to manage their own money.

The employer can negotiate for the immediate release of the held funds. The employer should bear the burden of the business error of selecting the Voya plan in the first place. Voya might negotiate hard, the employer might have to make up any loss Voya would suffer by complete release of all held stable value money and who knows what else.

Employees should not be made to suffer because of bone-headed business decisions of their employer. The employer is obligated to act as a fiduciary in the handling of the 401K accounts. The bone-headed decision was the employer's acceptance of the Voya plan terms in the first place years ago. Any costs to immediately exit the plan in full are the responsibility of the employer. Anything less than a full and complete immediate exit would seem to be an abdication of their fiduciary responsibilities.

Edited to add:

The employer's action that caused the employees funds to be restricted could likely be a violation of the terms of the 401k plan (the OP should request a full copy of the actual plan from the employer, don't be satisfied by just the typical summary plan description or "how to" booklet. The plan exists normally separate and apart from the relationship to the custodian. I suspect the restriction on access to employee funds may be a violation of ERISA regulations. It is possible that other investment options could soar in value in the 5 year lock-up period. Potentially a great class action case could be made against the employer for abdication of fiduciary responsibilities, damages would be the difference between the stable value option earnings and the highest earnings in the other plan options over the 5 year period.

These are pretty bold statements about fiduciary responsibilities of the employer/sponsor. How do you have any idea if the employer did a cost benefit analysis and decided the known risk on the SVF was worth the value of switching to a new plan administrator? The risks of the SVF and limitations were almost surely disclosed to the level required by the DOL. We have no idea what drove their changes.

The fund restrictions are almost surely allowed by law. Voya is a major retirement plan administrator, they know what they are doing.

Of course, if anyone is following 401K litigation, employees/participants have been on a long streak of major court case wins against sponsors. The OP could hire a lawyer and start a class action case against the employer and Voya.

[ResearchMed]

I agree. This is common. Such a "stable" value fund often comes with this type of restrictions. It is like buying a 5-year CD. If you break it, there is a penalty. Now the question os whether such a restriction was disclosed. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened.

This is sort of what I was asking about above - or I think so...

That is, these restrictions with the stable value fund... is this really something *new* with the change in vendor? Or was this part of the "stable value fund" from the start, much like the illiquid TIAA Trad Ann.
If so, then perhaps the problem is at least in part more that the change in vendor somehow brought it to OP's attention, but it was like that all along.

I have trouble thinking that the rules would have allowed a change in access to money if the vendor changed, although I suppose it's possible. Maybe...

RM

[student]

I agree. This is common. Such a "stable" value fund often comes with this type of restrictions. It is like buying a 5-year CD. If you break it, there is a penalty. Now the question os whether such a restriction was disclosed. I think that it is extremely likely that it was disclosed in one of the many many pages of legal documents that the OP received when the account was opened.

This is sort of what I was asking about above - or I think so...

That is, these restrictions with the stable value fund... is this really something *new* with the change in vendor? Or was this part of the "stable value fund" from the start, much like the illiquid TIAA Trad Ann.
If so, then perhaps the problem is at least in part more that the change in vendor somehow brought it to OP's attention, but it was like that all along.

I have trouble thinking that the rules would have allowed a change in access to money if the vendor changed, although I suppose it's possible. Maybe...

RM

OP thinks that this was triggered by his/her employer's terminating the contract (stated he/she has verified with the 401k advisor). In any case, I think everything must have spelled out in the many many pages of document that he/she has received when the account was opened.

[Macawi]

Let’s review some facts:

1) this was the only fund available to avoid stock or bond exposure. For those who say it was somewhere around in the fine print, yes technically it was but it was my only option. It’s not like I chose this fund for a slightly higher yield than an unrestricted alternative.

2) I chose this fund prior to any talk of my employer going with a new plan provider

3) I had no restrictions on exiting the fund prior to my employers withdrawal from voya. Had I exited prior to the blackout date I could have gotten all my money out.

4) my employer knew about this clause and contractually had agreed to it

5) My employer chose not to inform those who were in the fund that they may want to review their investment given this clause

6). If I resigned from my job I could get 100% of my investment out now.

For all those saying these stable value fund investments are restricted to prevent mass withdrawals, yes I understand the logic. But there are so many loopholes to it that it seems rather arbitrary and somewhat ineffective. Withdrawals should be restricted to everyone or open to everyone.

Lastly, my employer switched out of voya to lower fees for its plan participants. So for voya to restrict money leaving their fund family seems like an anti-competitive practice that should not be allowed. They obviously do it to make it more difficult on the employer to switch providers.

[retiringwhen]

What is the size of your company? If you have a group of affected individuals large enough to be worth reaching out to a Labor/ERISA lawyer to see if they can push back on company. Only you can decide if that is worth the potential cost.

[Katietsu]

5) My employer chose not to inform those who were in the fund that they may want to review their investment given this clause

Are you sure it was not in your documents describing the transition? My spouse has been involved in three retirees plan changes that included these kind of quirks. One transition specifically included a stable value fund. There was a footnote in the plain english transition documents which made it clear that any funds in the stable value fund would remain behind for one year. Did you get something which mapped how the investments in the old plan would be invested in the new plan? I would have thought this would all be requirements not niceties.

[exodusNH]

My employer switched retirement account providers from lets say Voya to Fidelity. I have a significant investment in the only "stability of principal" account offered. All other retirement funds either invested in stocks or bonds or both, which at the time I made the investment I did not want. Summary of the fund below:

"Assets are invested in conservative investment options that seek - but not necessarily guarantee - to hold the principal value of an investment stable through all market conditions. These options may credit a stated rate of return or minimum periodic interest rate that may vary. Dividend rates and income levels fluctuate with market conditions and are not guaranteed. These investment options, including money market portfolios, are neither insured nor guaranteed by the U.S. government."

Now that I'm logging into my new account, it has become clear that not all my assets transferred. After several calls I figured out the issue. In the fine print of the fund there is a section that has the following disclosure:

"Requests for Full Withdrawals Withdrawals from the Voya Fixed Plus Account III fund are allowed to pay benefits to participants at any time. However, if the plan, as the Contract Holder, requests a full withdrawal of all participant accounts held in the Voya Fixed Plus Account III, VRIAC will pay amounts in the Voya Fixed Plus Account III, with interest, in five annual payments that will be equal to: • One-fifth of the value in the Voya Fixed Plus Account III as of the business day VRIAC receives the withdrawal request in good order reduced by the amount, if any, transferred (including transfers made to issue a loan), withdrawn, or used to purchase annuity payments during the prior 12 months (VRIAC reserves the right to reduce the amount available by deducting any amount withdrawn under a systematic distribution option); then • One-fourth of the remaining amount 12 months later; then • One-third of the remaining amount 12 months later; then • One-half of the remaining amount 12 months later; then • The balance of the value in the Voya Fixed Plus Account III 12 months later."

I know this is very anti-boglehead and I do not want this to be a discussion on market timing but my plan for this money was to put it back into the market at some point, so it is very frustrating to me that access to my own retirement funds is being restricted by the provider. (For those who's eyes glazed over reading the fine print my money gets transferred to Fidelity essentially 20% a year over 5 years). The money that is left at Voya cannot be invested in a different Voya investment in the meantime. Basically my money is being held hostage. My questions for the forum are as follows:

1) Is this even legal and does a restriction like this conform with ERISA and/or other laws that cover retirement accounts?
2) Do I have any other options to get access to this money sooner?
3) Has anyone else ever dealt with a situation like this before?

As I mentioned in one of my prior posts, a similar situation happened with me. We changed 401k custodians. The old one (Empower) enforced their 12 months put clause on the SVF.

Speaking to the company that we pay to advise the plan, they said that while the company couldn't move the money, I could make a request as an individual to have it moved.

Due to timing, I never wound up needing to do it. I had set the paperwork aside. I just located it.

It was an "in-service withdrawal request" where the reason is listed as "I am requesting a transfer." The type of transfer is listed as "transfer to another retirement provider under this plan as a one-time transfer." The withdrawal was listed as payable to the new custodian FBO exodusNH.

I know you said your admin said it wasn't possible, but perhaps these phrases will prod them to look more into it. It's not a common operation. It took several calls over a couple of weeks for me to get to the point where it could have been transferred.