Employer switching to higher fee 401k admin. What would you do?

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Hastelloy
Posts: 15
Joined: Fri Jul 28, 2017 10:58 am

Employer switching to higher fee 401k admin. What would you do?

Post by Hastelloy » Sun Oct 06, 2019 5:26 pm

My employer is switching our 401k plan administrators from Vanguard to Voya Financial. From everything I have read, this could be a very bad deal- Voya appears to have dramatically higher fees across the board, and I have very much enjoyed my experience with Vanguard. I'm unsure which funds I will have access to once the plan is finalized, but I am mentally bracing for much higher fees. Current 401k value: $100,000.

Emergency fund: 1 year
Debt: None
Tax Filing Status: Single
Tax Rate 20% Fed, 7.5% state
California
Age: 33
AA: 90/10
NW: $500,000
High savings rate, very low expenses.

Am I required to roll over my 401k into Voyas management and higher fees, or can I roll the 100K into a Vanguard IRA instead to maintain access to Vanguard funds? I'm unsure if I have other options or what the tax implications might be.

You folks have been a fantastic wealth of knowledge, thank you.
H

retired@50
Posts: 489
Joined: Tue Oct 01, 2019 2:36 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by retired@50 » Sun Oct 06, 2019 5:30 pm

I suspect that all current plan assets will roll from current custodian to new custodian. I doubt that you'll have a say in the matter, unless you have some influence in the C-suite, I suspect you'll have to quit your job to get your money out of the current 401k and roll it into a Vanguard Rollover IRA. My condolences...

Trader Joe
Posts: 1184
Joined: Fri Apr 25, 2014 6:38 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by Trader Joe » Sun Oct 06, 2019 5:31 pm

Hastelloy wrote:
Sun Oct 06, 2019 5:26 pm
My employer is switching our 401k plan administrators from Vanguard to Voya Financial. From everything I have read, this could be a very bad deal- Voya appears to have dramatically higher fees across the board, and I have very much enjoyed my experience with Vanguard. I'm unsure which funds I will have access to once the plan is finalized, but I am mentally bracing for much higher fees. Current 401k value: $100,000.

Emergency fund: 1 year
Debt: None
Tax Filing Status: Single
Tax Rate 20% Fed, 7.5% state
California
Age: 33
AA: 90/10
NW: $500,000
High savings rate, very low expenses.

Am I required to roll over my 401k into Voyas management and higher fees, or can I roll the 100K into a Vanguard IRA instead to maintain access to Vanguard funds? I'm unsure if I have other options or what the tax implications might be.

You folks have been a fantastic wealth of knowledge, thank you.
H
I would wait until I understood the available options under the new plan and the associated expense ratios.

retired@50
Posts: 489
Joined: Tue Oct 01, 2019 2:36 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by retired@50 » Sun Oct 06, 2019 5:32 pm

Once you know what your choices will be with the Voya plan, post them for help in evaluating if you need it. Generally, you'll want to find index funds in domestic and foreign stocks and a bond index fund, if available. Best of luck.

lakpr
Posts: 2858
Joined: Fri Mar 18, 2011 9:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by lakpr » Sun Oct 06, 2019 5:33 pm

In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.

retiredjg
Posts: 38257
Joined: Thu Jan 10, 2008 12:56 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by retiredjg » Sun Oct 06, 2019 5:39 pm

Hastelloy wrote:
Sun Oct 06, 2019 5:26 pm
Am I required to roll over my 401k into Voyas management and higher fees, or can I roll the 100K into a Vanguard IRA instead to maintain access to Vanguard funds?
I believe I've read there are circumstances where the old plan is terminated and you can roll money out. This might accompany your employer being bought out by another company or something along this line.

If your employer is simply changing where the 401k is held, I don't think you get that choice.

Sit tight until you are given instructions. Worrying about it will not help anything. :?

retired@50
Posts: 489
Joined: Tue Oct 01, 2019 2:36 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by retired@50 » Sun Oct 06, 2019 5:48 pm

lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
Would a personal liability umbrella policy help in this circumstance? I would imagine it would, and perhaps in many other situations.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Sun Oct 06, 2019 6:16 pm

lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
This is the umpteenth incorrect post of this sort I’ve seen in the past few weeks. IRAs receive federal protection in bankruptcy up to 1.3 million dollars and change, and ROLLOVER IRAs receive unlimited protection. Federal bankruptcy protections override state protections if they are more generous. Please stop spreading misinformation.

Your advice is also bad because bankruptcy is a very low-risk event (and highly dependent on individual circumstances), but high fees are a guaranteed expense. So even if your premise were not 100% wrong, giving advice that someone shouldn’t roll over a high-fee 401(k) to a fee-free IRA in California as a general rule would also be highly misguided.
Last edited by frcabot on Sun Oct 06, 2019 7:26 pm, edited 4 times in total.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Sun Oct 06, 2019 6:16 pm

retired@50 wrote:
Sun Oct 06, 2019 5:48 pm
lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
Would a personal liability umbrella policy help in this circumstance? I would imagine it would, and perhaps in many other situations.
The poster was wrong. Rollover IRAs receive unlimited protection in bankruptcy regardless of state so it’s not something you need to worry about.

GuyInFL
Posts: 244
Joined: Thu Aug 04, 2016 7:17 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by GuyInFL » Sun Oct 06, 2019 6:20 pm

I have Voya for my 401K and have very reasonable fees at megacorp.

lakpr
Posts: 2858
Joined: Fri Mar 18, 2011 9:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by lakpr » Sun Oct 06, 2019 6:22 pm

frcabot wrote:
Sun Oct 06, 2019 6:16 pm
lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
This is the umpteenth incorrect post of this sort I’ve seen in the past few weeks. IRAs receive federal protection in bankruptcy up to 1.3 million dollars and change, and ROLLOVER IRAs receive unlimited protection. Federal bankruptcy protections override state protections if they are more generous. Please stop spreading misinformation.

Your advice is also bad because bankruptcy is a very low-risk event (and highly dependent on individual circumstances), but high fees are a guaranteed expense. So even if your premise were not 100% wrong, giving advice that someone shouldn’t roll over a high-fee 401(k) to a few-free IRA in California as a general rule would also be highly misguided.
You haven't read my comments carefully. Bankruptcy protection for IRAs comes into the picture, ONLY IF the person is filing a bankruptcy. I am saying that a CREDITOR WITH JUDGMENT can attach an IRA in California. The defendant need not be filing for bankruptcy protection.

There is a difference between "bankruptcy protection" afforded by BAPCAP, and "liability protection" afforded by ERISA but not by IRAs.

[Comment removed by Moderator Misenplace]
Last edited by lakpr on Sun Oct 06, 2019 6:28 pm, edited 1 time in total.

lakpr
Posts: 2858
Joined: Fri Mar 18, 2011 9:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by lakpr » Sun Oct 06, 2019 6:23 pm

retired@50 wrote:
Sun Oct 06, 2019 5:48 pm
lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
Would a personal liability umbrella policy help in this circumstance? I would imagine it would, and perhaps in many other situations.
I'd imagine yes.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Sun Oct 06, 2019 7:00 pm

lakpr wrote:
Sun Oct 06, 2019 6:22 pm
frcabot wrote:
Sun Oct 06, 2019 6:16 pm
lakpr wrote:
Sun Oct 06, 2019 5:33 pm
In California especially, you should not be rolling over 401k plan funds to an IRA. Creditors with liability judgments can attach your IRA to satisfy the judgment, whereas money is 401k plans is bulletproof. California is notorious for having one of the weakest protections for IRA funds.

Yes, Voya has a bad reputation, but you might want to find out more whether you are allowed to keep the funds at Vanguard or you must rollover to Voya. If you must, what would be the expense ratio. You may not have a choice to roll over to IRA at all, at least not if you intend to continue employment with that particular employer.
This is the umpteenth incorrect post of this sort I’ve seen in the past few weeks. IRAs receive federal protection in bankruptcy up to 1.3 million dollars and change, and ROLLOVER IRAs receive unlimited protection. Federal bankruptcy protections override state protections if they are more generous. Please stop spreading misinformation.

Your advice is also bad because bankruptcy is a very low-risk event (and highly dependent on individual circumstances), but high fees are a guaranteed expense. So even if your premise were not 100% wrong, giving advice that someone shouldn’t roll over a high-fee 401(k) to a few-free IRA in California as a general rule would also be highly misguided.
You haven't read my comments carefully. Bankruptcy protection for IRAs comes into the picture, ONLY IF the person is filing a bankruptcy. I am saying that a CREDITOR WITH JUDGMENT can attach an IRA in California. The defendant need not be filing for bankruptcy protection.

There is a difference between "bankruptcy protection" afforded by BAPCAP, and "liability protection" afforded by ERISA but not by IRAs.

[Comment removed by Moderator Misenplace]
Thats completely irrelevant. If the amount of the debt exceeded the amount of non-exempt assets, then the debtor would just declare bankruptcy and the IRA assets would be exempted. Moreover, even without declaring bankruptcy, rollover IRAs ARE protected under California creditor laws. Because California law protects private retirement plans, including 401(k), and also allows for tracing, CCP section 703.80, rollover IRAs under State law are fully protected so long as they are traceable to a 401k. So long as funds from a rollover IRA are not commingled with those from a regular IRA, they would be exempt from creditors, bankruptcy or not. See McMullen v Haycock, 54 Cal. Rptr. 3d 660 (Cal. Ct. App. 2007). So again, please stop spreading misinformation.
Yours,
A California Attorney.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Sun Oct 06, 2019 7:14 pm

And to take it one step further, even if federal bankruptcy protections didn’t apply, and the IRA funds couldn’t be traced to an ERISA plan, then it’s still not as if IRAs wouldn’t receive ANY California protection. A court would just analyze whether the funds were necessary to provide for support in retirement. I suppose if you had a multi-million dollar IRA balance it might not be clear cut, but for anything short of that I wouldn’t worry too much. Besides, once again, if the non-exempt assets don’t satisfy a judgment, bankruptcy is the viable option in which case this all becomes moot.

lakpr
Posts: 2858
Joined: Fri Mar 18, 2011 9:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by lakpr » Mon Oct 07, 2019 9:24 am

So, this morning I tried to google again the phrase "IRA protection in California". The McMullen v. Haycock case makes its presence in many of the search results, but many with disclaimers similar the below.

https://www.irahelp.com/forum-post/1796 ... california
This appears to be a case where the bankruptcy court granted unlimited protection in the case of a qualified plan IRA rollover under CA tracing provisions. However, the CA civil statutes were not changed to reflect this ruling and therefore if a creditor goes after your rollover IRA in CA, you might have to secure your own court decision. Therefore, I would not depend on it, particularly if you have creditor exposure. In addition, authoritative asset protection publications (Adkisson, Riser) do not cite this court decision and still consider IRA accounts in CA to only be protected up to the amount required to sustain a basic life style. This can result in as little as 100,000 being preserved outside of the federal bankruptcy Act protection which requires a BK filing.
https://wadelawcorp.com/2016/04/how-to- ... alifornia/
In light of the lack of protection from creditors for IRAs, the next time you leave one employer for another, you may wish to refrain from rolling your 401(k) savings over into an IRA. Although California law shields funds in IRAs and Roth IRAs that are considered necessary to support the owner and the owner’s dependents during retirement, any surplus can be collected by creditors if you are the defendant in a lawsuit or facing bankruptcy.
https://www.assetprotectionplanners.com ... rnia-laws/
California is not known as a state with strong asset protection laws.
....
However, IRA’s have the weakest protection in California. (IRAs Could Be Fair Game in Lawsuits [in California] – LA Times.) This is because if a judge feels the debtor has other means of supporting himself or herself in retirement, the judge can order IRA seizure. We have seen IRA seizure time and time again.

Safe: 401Ks

Not safe: IRAs
https://www.thetaxadviser.com/content/d ... achart.pdf
CaliforniaCal. Code of Civ. Proc. §704.115
Partly
No
IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judg-ment debtor retires
I could quote umpteen other articles from my Google search, but my point is that it's more or less established legal opinion that IRAs have weak protections in California, and given a choice between retaining funds in 401ks and rolling over to IRAs, retaining in 401k is the better option. Both of which I said previously in this thread, before you started "getting mad" (your words) about it being misinformation. If me saying those things has become misinformation, then all these websites, lawyers even, are wrong too.

Weighing your advice (one opinion) against a multitude of the other legal opinions published on the web, I am inclined to believe the other legal opinions than yours.

I will continue to advocate, especially for Californians, to retain assets within 401k and not roll into IRAs.

This is also my last post on the subject in this thread.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Mon Oct 07, 2019 9:35 am

lakpr wrote:
Mon Oct 07, 2019 9:24 am
So, this morning I tried to google again the phrase "IRA protection in California". The McMullen v. Haycock case makes its presence in many of the search results, but many with disclaimers similar the below.

https://www.irahelp.com/forum-post/1796 ... california
This appears to be a case where the bankruptcy court granted unlimited protection in the case of a qualified plan IRA rollover under CA tracing provisions. However, the CA civil statutes were not changed to reflect this ruling and therefore if a creditor goes after your rollover IRA in CA, you might have to secure your own court decision. Therefore, I would not depend on it, particularly if you have creditor exposure. In addition, authoritative asset protection publications (Adkisson, Riser) do not cite this court decision and still consider IRA accounts in CA to only be protected up to the amount required to sustain a basic life style. This can result in as little as 100,000 being preserved outside of the federal bankruptcy Act protection which requires a BK filing.
https://wadelawcorp.com/2016/04/how-to- ... alifornia/
In light of the lack of protection from creditors for IRAs, the next time you leave one employer for another, you may wish to refrain from rolling your 401(k) savings over into an IRA. Although California law shields funds in IRAs and Roth IRAs that are considered necessary to support the owner and the owner’s dependents during retirement, any surplus can be collected by creditors if you are the defendant in a lawsuit or facing bankruptcy.
https://www.assetprotectionplanners.com ... rnia-laws/
California is not known as a state with strong asset protection laws.
....
However, IRA’s have the weakest protection in California. (IRAs Could Be Fair Game in Lawsuits [in California] – LA Times.) This is because if a judge feels the debtor has other means of supporting himself or herself in retirement, the judge can order IRA seizure. We have seen IRA seizure time and time again.

Safe: 401Ks

Not safe: IRAs
https://www.thetaxadviser.com/content/d ... achart.pdf
CaliforniaCal. Code of Civ. Proc. §704.115
Partly
No
IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judg-ment debtor retires
I could quote umpteen other articles from my Google search, but my point is that it's more or less established legal opinion that IRAs have weak protections in California, and given a choice between retaining funds in 401ks and rolling over to IRAs, retaining in 401k is the better option. Both of which I said previously in this thread, before you started "getting mad" (your words) about it being misinformation. If me saying those things has become misinformation, then all these websites, lawyers even, are wrong too.

Weighing your advice (one opinion) against a multitude of the other legal opinions published on the web, I am inclined to believe the other legal opinions than yours.

I will continue to advocate, especially for Californians, to retain assets within 401k and not roll into IRAs.

This is also my last post on the subject in this thread.
You don’t seem to understand what I said and you are moreover making the same misunderstanding you (incorrectly) accused me of making. McMullen was NOT a bankruptcy case. It was an ordinary California state court creditor enforcement of judgment case, ie a case of a judgment creditor seeking to recover against a judgment debtor as a result of a court judgment. It is binding precedent in California and has not been overruled, ie lower courts in California are bound to follow the court case. It is a PUBLISHED California Court of Appeal case, so lower courts have absolutely no discretion in refusing to follow it—none. It is an interpretation of existing exemption statutes, so nothing needs to be “codified.” Courts do not make law. They interpret existing law. Once again, I’ll connect the dots for you because the logic is very clear. Private retirement plans / ERISA plans receive unlimited protection from creditors in California. California allows for tracing of assets. Therefore, any assets that can be proven to have originated from private retirement / ERISA plans receive unlimited protection from creditors. This is not a novel holding or one that requires tortuous leaps of logic.

In a bankruptcy case, moreover, federal bankruptcy protections would apply and grant unlimited protection to rollover IRAs. So, once again, if there were any doubt about whether the rollover IRA would be protected, a judgment debtor would simply file bankruptcy, and avail themselves of the federal bankruptcy protections. (Ordinarily, someone has to choose between state and federal bankruptcy protections. In California, federal bankruptcy protections are not available at all, and instead 2 different state statutory schemes are available. However, federal RETIREMENT bankruptcy protections, as regards ERISA-plans (including rollovers, SIMPLE and SEP IRAs) and Traditional and Roth IRAs, still apply.

Also, the LA Times article you cite (IRAs could be fair games in lawsuits...) is from 2001, before Congress passed the 2005 reform shielding IRAs, so a website in 2019 quoting a 2001 article doesn’t give me a ton of confidence.

It’s very clear you’re not an attorney. So my advice to you is that you ought to stop giving out erroneous advice that you read on the web and don’t understand or don’t verify. Most of the cites you quote are NOT from attorneys. Stop trying to play one online.
Last edited by frcabot on Mon Oct 07, 2019 10:43 am, edited 2 times in total.

zlandar
Posts: 154
Joined: Wed Apr 10, 2019 8:51 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by zlandar » Mon Oct 07, 2019 9:46 am

The money in your employer 401k will automatically transfer over to the new 401k provider. You are not allowed to stay with the old provider or roll the money into your own IRA.

It's only after you leave your current employer that you have the option of moving money from the 401k to your own IRA.

Curious why your employer would go to the effort of switching 401k providers when the overall cost is likely higher.

HomeStretch
Posts: 2651
Joined: Thu Dec 27, 2018 3:06 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by HomeStretch » Mon Oct 07, 2019 9:51 am

Have you received written notice of the 401k provider change from your employer yet? The notice should answer your questions.

Written notice needs to be communicated to participants xxx days before the transition explaining blackout periods, how your current funds will be mapped to the new provider’s funds, fees and ERs, etc. If there is an option for you to move your funds out of the 401k (for example to an IRA), that should be in the notice as well.

frcabot
Posts: 211
Joined: Mon Mar 26, 2018 12:59 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Mon Oct 07, 2019 9:56 am

lakpr wrote:
Mon Oct 07, 2019 9:24 am
So, this morning I tried to google again the phrase "IRA protection in California". The McMullen v. Haycock case makes its presence in many of the search results, but many with disclaimers similar the below.

https://www.irahelp.com/forum-post/1796 ... california
This appears to be a case where the bankruptcy court granted unlimited protection in the case of a qualified plan IRA rollover under CA tracing provisions. However, the CA civil statutes were not changed to reflect this ruling and therefore if a creditor goes after your rollover IRA in CA, you might have to secure your own court decision. Therefore, I would not depend on it, particularly if you have creditor exposure. In addition, authoritative asset protection publications (Adkisson, Riser) do not cite this court decision and still consider IRA accounts in CA to only be protected up to the amount required to sustain a basic life style. This can result in as little as 100,000 being preserved outside of the federal bankruptcy Act protection which requires a BK filing.
https://wadelawcorp.com/2016/04/how-to- ... alifornia/
In light of the lack of protection from creditors for IRAs, the next time you leave one employer for another, you may wish to refrain from rolling your 401(k) savings over into an IRA. Although California law shields funds in IRAs and Roth IRAs that are considered necessary to support the owner and the owner’s dependents during retirement, any surplus can be collected by creditors if you are the defendant in a lawsuit or facing bankruptcy.
https://www.assetprotectionplanners.com ... rnia-laws/
California is not known as a state with strong asset protection laws.
....
However, IRA’s have the weakest protection in California. (IRAs Could Be Fair Game in Lawsuits [in California] – LA Times.) This is because if a judge feels the debtor has other means of supporting himself or herself in retirement, the judge can order IRA seizure. We have seen IRA seizure time and time again.

Safe: 401Ks

Not safe: IRAs
https://www.thetaxadviser.com/content/d ... achart.pdf
CaliforniaCal. Code of Civ. Proc. §704.115
Partly
No
IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judg-ment debtor retires
I could quote umpteen other articles from my Google search, but my point is that it's more or less established legal opinion that IRAs have weak protections in California, and given a choice between retaining funds in 401ks and rolling over to IRAs, retaining in 401k is the better option. Both of which I said previously in this thread, before you started "getting mad" (your words) about it being misinformation. If me saying those things has become misinformation, then all these websites, lawyers even, are wrong too.

Weighing your advice (one opinion) against a multitude of the other legal opinions published on the web, I am inclined to believe the other legal opinions than yours.

I will continue to advocate, especially for Californians, to retain assets within 401k and not roll into IRAs.

This is also my last post on the subject in this thread.
If anything I would trust nolo, so here we are with that:
https://www.nolo.com/legal-encyclopedia ... ornia.html

Additional Roll Over Protection

“If you roll over funds from an ERISA account or PRP into an IRA, those funds remain 100% exempt. This is the case even though the IRA is not fully exempt in California. As long as you are able to prove that the funds in your IRA originally came from an ERISA account or PRP, then you do not have to go through the “necessary for support” test.”

I’ll reiterate. Under California law, rollover IRAs receive unlimited protection so long as assets have not been commingled. Under Federal law, rollover IRAs receive unlimited protection so long as assets have not been commingled. State court judgment would be enforced under state law (unlimited rollover protections) unless a debtor declared bankruptcy, in which case the case would be argued in bankruptcy court — a federal court — where rollover IRAs would also receive unlimited protection.

There are also a lot of sites erroneously saying that SEP and SIMPLE IRAs are not ERISA-qualified plans and don’t receive unlimited protections. This is 100% false as well. SIMPLE and SEP IRAs are employer-sponsored plans and considered exempt property both in California and federally.

[OT comment removed by moderator oldcomputerguy]

RPA59
Posts: 3
Joined: Mon Aug 12, 2019 9:41 am

Re: Employer switching to higher fee 401k admin. What would you do?

Post by RPA59 » Mon Oct 07, 2019 10:57 am

GuyInFL wrote:
Sun Oct 06, 2019 6:20 pm
I have Voya for my 401K and have very reasonable fees at megacorp.
I work for the satellite office of a large European company, and we have our 401k with Voya. While it doesn't have a great list of funds with low ERs to select from, I do have some Vanguard Index Funds (Admiral Shares) that I can choose from. This will also depend on if you have a TPA that advises on your 401k as well. You can bring up concerns with your TPA if you have one.
You'll have to wait to see the fund lineup to decide if it is good/bad.

MotoTrojan
Posts: 6582
Joined: Wed Feb 01, 2017 8:39 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by MotoTrojan » Mon Oct 07, 2019 11:16 am

Id hope you’ll at least get a fund or two that are reasonable. I’d guess there is a chance you’ll no longer be able to hold a full 3+ fund portfolio without expense increases but perhaps they have S&P500 at Vanguard price levels and then you can hold other assets in IRA/taxable. Look at your portfolio as one entity.

JW-Retired
Posts: 7133
Joined: Sun Dec 16, 2007 12:25 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by JW-Retired » Mon Oct 07, 2019 1:18 pm

Hastelloy wrote:
Sun Oct 06, 2019 5:26 pm
My employer is switching our 401k plan administrators from Vanguard to Voya Financial. From everything I have read, this could be a very bad deal- Voya appears to have dramatically higher fees across the board, and I have very much enjoyed my experience with Vanguard. I'm unsure which funds I will have access to once the plan is finalized, but I am mentally bracing for much higher fees. Current 401k value: $100,000.
Voya may be perfectly fine! Wait and see.

The 401k fees largely depend on the size and sense of your employer. Some years back my mega employer switched from an exceedingly low fee 401k administrator to Voya and the fees stayed at rock bottom for plenty of choices.... i.e., 0.0x%.

They switched again after I retired and the same thing has happened.
JW
Retired at Last

JBTX
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by JBTX » Mon Oct 07, 2019 7:37 pm

frcabot wrote:
Mon Oct 07, 2019 9:56 am
lakpr wrote:
Mon Oct 07, 2019 9:24 am
So, this morning I tried to google again the phrase "IRA protection in California". The McMullen v. Haycock case makes its presence in many of the search results, but many with disclaimers similar the below.

https://www.irahelp.com/forum-post/1796 ... california
This appears to be a case where the bankruptcy court granted unlimited protection in the case of a qualified plan IRA rollover under CA tracing provisions. However, the CA civil statutes were not changed to reflect this ruling and therefore if a creditor goes after your rollover IRA in CA, you might have to secure your own court decision. Therefore, I would not depend on it, particularly if you have creditor exposure. In addition, authoritative asset protection publications (Adkisson, Riser) do not cite this court decision and still consider IRA accounts in CA to only be protected up to the amount required to sustain a basic life style. This can result in as little as 100,000 being preserved outside of the federal bankruptcy Act protection which requires a BK filing.
https://wadelawcorp.com/2016/04/how-to- ... alifornia/
In light of the lack of protection from creditors for IRAs, the next time you leave one employer for another, you may wish to refrain from rolling your 401(k) savings over into an IRA. Although California law shields funds in IRAs and Roth IRAs that are considered necessary to support the owner and the owner’s dependents during retirement, any surplus can be collected by creditors if you are the defendant in a lawsuit or facing bankruptcy.
https://www.assetprotectionplanners.com ... rnia-laws/
California is not known as a state with strong asset protection laws.
....
However, IRA’s have the weakest protection in California. (IRAs Could Be Fair Game in Lawsuits [in California] – LA Times.) This is because if a judge feels the debtor has other means of supporting himself or herself in retirement, the judge can order IRA seizure. We have seen IRA seizure time and time again.

Safe: 401Ks

Not safe: IRAs
https://www.thetaxadviser.com/content/d ... achart.pdf
CaliforniaCal. Code of Civ. Proc. §704.115
Partly
No
IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judg-ment debtor retires
I could quote umpteen other articles from my Google search, but my point is that it's more or less established legal opinion that IRAs have weak protections in California, and given a choice between retaining funds in 401ks and rolling over to IRAs, retaining in 401k is the better option. Both of which I said previously in this thread, before you started "getting mad" (your words) about it being misinformation. If me saying those things has become misinformation, then all these websites, lawyers even, are wrong too.

Weighing your advice (one opinion) against a multitude of the other legal opinions published on the web, I am inclined to believe the other legal opinions than yours.

I will continue to advocate, especially for Californians, to retain assets within 401k and not roll into IRAs.

This is also my last post on the subject in this thread.
If anything I would trust nolo, so here we are with that:
https://www.nolo.com/legal-encyclopedia ... ornia.html

Additional Roll Over Protection

“If you roll over funds from an ERISA account or PRP into an IRA, those funds remain 100% exempt. This is the case even though the IRA is not fully exempt in California. As long as you are able to prove that the funds in your IRA originally came from an ERISA account or PRP, then you do not have to go through the “necessary for support” test.”

I’ll reiterate. Under California law, rollover IRAs receive unlimited protection so long as assets have not been commingled. Under Federal law, rollover IRAs receive unlimited protection so long as assets have not been commingled. State court judgment would be enforced under state law (unlimited rollover protections) unless a debtor declared bankruptcy, in which case the case would be argued in bankruptcy court — a federal court — where rollover IRAs would also receive unlimited protection.

There are also a lot of sites erroneously saying that SEP and SIMPLE IRAs are not ERISA-qualified plans and don’t receive unlimited protections. This is 100% false as well. SIMPLE and SEP IRAs are employer-sponsored plans and considered exempt property both in California and federally.

[OT comment removed by moderator oldcomputerguy]



This was an interesting and enlightening conversation. I live in TX where IRA protections are better, but it seems like unless there is a compelling reason to do otherwise, it is best not to co-mingle rollover ira assets with other ira assets. That used to be a known rule of thumb, but now the conventional wisdom seems to be you should simplify and consolidate all of your assets. It is one of the reasons I have a slew different iras because most of them are rollovers. I could consolidate a couple of rollovers but haven't bothered.

So what happens if you roll $100k of 401k to a rollover ira, then convert $50k to a Roth? Does the protection carry over to the Roth?

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Mon Oct 07, 2019 7:51 pm

JBTX wrote:
Mon Oct 07, 2019 7:37 pm
frcabot wrote:
Mon Oct 07, 2019 9:56 am
lakpr wrote:
Mon Oct 07, 2019 9:24 am
So, this morning I tried to google again the phrase "IRA protection in California". The McMullen v. Haycock case makes its presence in many of the search results, but many with disclaimers similar the below.

https://www.irahelp.com/forum-post/1796 ... california
This appears to be a case where the bankruptcy court granted unlimited protection in the case of a qualified plan IRA rollover under CA tracing provisions. However, the CA civil statutes were not changed to reflect this ruling and therefore if a creditor goes after your rollover IRA in CA, you might have to secure your own court decision. Therefore, I would not depend on it, particularly if you have creditor exposure. In addition, authoritative asset protection publications (Adkisson, Riser) do not cite this court decision and still consider IRA accounts in CA to only be protected up to the amount required to sustain a basic life style. This can result in as little as 100,000 being preserved outside of the federal bankruptcy Act protection which requires a BK filing.
https://wadelawcorp.com/2016/04/how-to- ... alifornia/
In light of the lack of protection from creditors for IRAs, the next time you leave one employer for another, you may wish to refrain from rolling your 401(k) savings over into an IRA. Although California law shields funds in IRAs and Roth IRAs that are considered necessary to support the owner and the owner’s dependents during retirement, any surplus can be collected by creditors if you are the defendant in a lawsuit or facing bankruptcy.
https://www.assetprotectionplanners.com ... rnia-laws/
California is not known as a state with strong asset protection laws.
....
However, IRA’s have the weakest protection in California. (IRAs Could Be Fair Game in Lawsuits [in California] – LA Times.) This is because if a judge feels the debtor has other means of supporting himself or herself in retirement, the judge can order IRA seizure. We have seen IRA seizure time and time again.

Safe: 401Ks

Not safe: IRAs
https://www.thetaxadviser.com/content/d ... achart.pdf
CaliforniaCal. Code of Civ. Proc. §704.115
Partly
No
IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judg-ment debtor retires
I could quote umpteen other articles from my Google search, but my point is that it's more or less established legal opinion that IRAs have weak protections in California, and given a choice between retaining funds in 401ks and rolling over to IRAs, retaining in 401k is the better option. Both of which I said previously in this thread, before you started "getting mad" (your words) about it being misinformation. If me saying those things has become misinformation, then all these websites, lawyers even, are wrong too.

Weighing your advice (one opinion) against a multitude of the other legal opinions published on the web, I am inclined to believe the other legal opinions than yours.

I will continue to advocate, especially for Californians, to retain assets within 401k and not roll into IRAs.

This is also my last post on the subject in this thread.
If anything I would trust nolo, so here we are with that:
https://www.nolo.com/legal-encyclopedia ... ornia.html

Additional Roll Over Protection

“If you roll over funds from an ERISA account or PRP into an IRA, those funds remain 100% exempt. This is the case even though the IRA is not fully exempt in California. As long as you are able to prove that the funds in your IRA originally came from an ERISA account or PRP, then you do not have to go through the “necessary for support” test.”

I’ll reiterate. Under California law, rollover IRAs receive unlimited protection so long as assets have not been commingled. Under Federal law, rollover IRAs receive unlimited protection so long as assets have not been commingled. State court judgment would be enforced under state law (unlimited rollover protections) unless a debtor declared bankruptcy, in which case the case would be argued in bankruptcy court — a federal court — where rollover IRAs would also receive unlimited protection.

There are also a lot of sites erroneously saying that SEP and SIMPLE IRAs are not ERISA-qualified plans and don’t receive unlimited protections. This is 100% false as well. SIMPLE and SEP IRAs are employer-sponsored plans and considered exempt property both in California and federally.

[OT comment removed by moderator oldcomputerguy]



This was an interesting and enlightening conversation. I live in TX where IRA protections are better, but it seems like unless there is a compelling reason to do otherwise, it is best not to co-mingle rollover ira assets with other ira assets. That used to be a known rule of thumb, but now the conventional wisdom seems to be you should simplify and consolidate all of your assets. It is one of the reasons I have a slew different iras because most of them are rollovers. I could consolidate a couple of rollovers but haven't bothered.

So what happens if you roll $100k of 401k to a rollover ira, then convert $50k to a Roth? Does the protection carry over to the Roth?
Yes, as long as the assets can be traced there is no problem. In other words, just keep the converted Roth separate from any other Roth IRAs.

Even if they are commingled the court is theoretically supposed to tease them out but it can be quite difficult because of earnings. In other words, there’s no law or case saying that if the IRAs are commingled that the ERISA-based funds lose their protection. It’s just an issue of practicality.

Merging rollover IRAs is also OK but the critical aspect is the ability to trace, so make sure you keep records proving that all assets in the rollover IRAs came from ERISA plans and accumulated earnings.

Again this only applies in a bankruptcy situation (or a situation where a debt exceeds non-exempt assets) so for most Bogleheads this is going to be a very, very low probability event and not one I’d lose much sleep over.

Also, in Texas, state law provides for unlimited protection of IRAs, including even inherited IRAs (which receive no protection under federal law or most state laws). See Tex. Prop. Code section 42.0021. So as a practical matter, if you plan on remaining in Texas, it doesn’t much matter if ERISA funds/Rollover IRAs are commingled with regular IRAs.
Last edited by frcabot on Mon Oct 07, 2019 8:07 pm, edited 1 time in total.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by Wiggums » Mon Oct 07, 2019 8:04 pm

retired@50 wrote:
Sun Oct 06, 2019 5:32 pm
Once you know what your choices will be with the Voya plan, post them for help in evaluating if you need it. Generally, you'll want to find index funds in domestic and foreign stocks and a bond index fund, if available. Best of luck.
I agree. Let’s us know what the new plan looks like.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by z3r0c00l » Mon Oct 07, 2019 8:14 pm

I have VOYA and, the cheap and occasionally down web page notwithstanding, the fees seem relatively reasonable. Reasonable enough that I use the 401K despite not having an employer match. Most of the options in our VOYA 401K are via State Street Global Advisers. Eager to see what you wind up with to compare. Will let you know what the next ER disclosure says on our end.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by arsenalfan » Mon Oct 07, 2019 8:27 pm

1. Hopefully you will have a self-directed brokerage option but probably not.
2. My partner has Voya. There is a low ER Large Cap, Mid Cap, Small Cap Index. We just use those. They're adequate.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by unclescrooge » Mon Oct 07, 2019 10:55 pm

frcabot wrote:
Mon Oct 07, 2019 7:51 pm

Yes, as long as the assets can be traced there is no problem. In other words, just keep the converted Roth separate from any other Roth IRAs.

Even if they are commingled the court is theoretically supposed to tease them out but it can be quite difficult because of earnings. In other words, there’s no law or case saying that if the IRAs are commingled that the ERISA-based funds lose their protection. It’s just an issue of practicality.

Merging rollover IRAs is also OK but the critical aspect is the ability to trace, so make sure you keep records proving that all assets in the rollover IRAs came from ERISA plans and accumulated earnings.

Again this only applies in a bankruptcy situation (or a situation where a debt exceeds non-exempt assets) so for most Bogleheads this is going to be a very, very low probability event and not one I’d lose much sleep over.

Also, in Texas, state law provides for unlimited protection of IRAs, including even inherited IRAs (which receive no protection under federal law or most state laws). See Tex. Prop. Code section 42.0021. So as a practical matter, if you plan on remaining in Texas, it doesn’t much matter if ERISA funds/Rollover IRAs are commingled with regular IRAs.
Thank you for enlightening us. :beer

To go the other direction, what if non-ERISA IRAs are rolled into a 401k or SEP IRA, do they now enjoy bankruptcy protection?

frcabot
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Tue Oct 08, 2019 4:21 am

unclescrooge wrote:
Mon Oct 07, 2019 10:55 pm
frcabot wrote:
Mon Oct 07, 2019 7:51 pm

Yes, as long as the assets can be traced there is no problem. In other words, just keep the converted Roth separate from any other Roth IRAs.

Even if they are commingled the court is theoretically supposed to tease them out but it can be quite difficult because of earnings. In other words, there’s no law or case saying that if the IRAs are commingled that the ERISA-based funds lose their protection. It’s just an issue of practicality.

Merging rollover IRAs is also OK but the critical aspect is the ability to trace, so make sure you keep records proving that all assets in the rollover IRAs came from ERISA plans and accumulated earnings.

Again this only applies in a bankruptcy situation (or a situation where a debt exceeds non-exempt assets) so for most Bogleheads this is going to be a very, very low probability event and not one I’d lose much sleep over.

Also, in Texas, state law provides for unlimited protection of IRAs, including even inherited IRAs (which receive no protection under federal law or most state laws). See Tex. Prop. Code section 42.0021. So as a practical matter, if you plan on remaining in Texas, it doesn’t much matter if ERISA funds/Rollover IRAs are commingled with regular IRAs.
Thank you for enlightening us. :beer

To go the other direction, what if non-ERISA IRAs are rolled into a 401k or SEP IRA, do they now enjoy bankruptcy protection?
That is a really interesting question. To be honest, I’m not aware of any bankruptcy court considering the implications of a reverse rollover. I think part of that is practicality. An ERISA plan is not part of a bankruptcy estate per US Supreme Court precedent and ERISA. Because of this, and because reverse rollovers are very rare, I’m not sure that a trustee or bankruptcy court has ever investigated untangling reverse rollovers. I suppose if there had been a recent reverse rollover prior to a bankruptcy filing, it could be unentangled if fraudulent intent was suspected, but honestly I’m not aware of this issue being addressed in any published decision. If it were clear something like this had been done specifically to shield assets in light of an upcoming filing, one would be most at risk of complications. If the reverse rollover had been done years prior, then there’s probably no way the trustee or bankruptcy court would even learn of the reverse rollover in the first place. At worst, if a debtor had knowingly attempted to conceal assets from the bankruptcy estate (and intent is important here), it could be considered a federal felony. See, e.g. 18 U.S.C. Section 152 (attempting to knowingly and fraudulently conceal assets from bankruptcy trustee, court or creditors).

McDougal
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by McDougal » Tue Oct 08, 2019 6:02 am

zlandar wrote:
Mon Oct 07, 2019 9:46 am
The money in your employer 401k will automatically transfer over to the new 401k provider. You are not allowed to stay with the old provider or roll the money into your own IRA.

It's only after you leave your current employer that you have the option of moving money from the 401k to your own IRA.

Curious why your employer would go to the effort of switching 401k providers when the overall cost is likely higher.
It's possible that the cost to the employer is actually cheaper.

zlandar
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by zlandar » Tue Oct 08, 2019 7:08 am

McDougal wrote:
Tue Oct 08, 2019 6:02 am
zlandar wrote:
Mon Oct 07, 2019 9:46 am
The money in your employer 401k will automatically transfer over to the new 401k provider. You are not allowed to stay with the old provider or roll the money into your own IRA.

It's only after you leave your current employer that you have the option of moving money from the 401k to your own IRA.

Curious why your employer would go to the effort of switching 401k providers when the overall cost is likely higher.
It's possible that the cost to the employer is actually cheaper.
Admin costs with Vanguard using Ascensus as the TPA is $7700/year for 35 participants at my company.

The admin costs are peanuts when you factor in the increased fund cost to the participants.

OnTrack
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by OnTrack » Tue Oct 08, 2019 8:17 pm

zlandar wrote:
Mon Oct 07, 2019 9:46 am
The money in your employer 401k will automatically transfer over to the new 401k provider. You are not allowed to stay with the old provider or roll the money into your own IRA.

It's only after you leave your current employer that you have the option of moving money from the 401k to your own IRA.

Curious why your employer would go to the effort of switching 401k providers when the overall cost is likely higher.
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.

I suspect that the employer is switching providers because the fees the employer pays are less even though the fees the employees pay may be more.

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Nate79
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by Nate79 » Tue Oct 08, 2019 8:43 pm

Until the fund list is published and actual expenses compared it's all speculation at this point. The ER of the funds could decrease as far as we know because Voya administered plans can have dirt cheap funds in them.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by Spirit Rider » Tue Oct 08, 2019 9:15 pm

OnTrack wrote:
Tue Oct 08, 2019 8:17 pm
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.
This would be a blatant violation of IRS regulations unless this was a part of certain acquisitions or mergers.

The only assets that would be eligible for rollover would be the same assets that would be eligible at any other time. Namely only rollover contributions, vested employer contributions and employee after-tax contributions.

OnTrack
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by OnTrack » Wed Oct 09, 2019 1:35 pm

Spirit Rider wrote:
Tue Oct 08, 2019 9:15 pm
OnTrack wrote:
Tue Oct 08, 2019 8:17 pm
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.
This would be a blatant violation of IRS regulations unless this was a part of certain acquisitions or mergers.

The only assets that would be eligible for rollover would be the same assets that would be eligible at any other time. Namely only rollover contributions, vested employer contributions and employee after-tax contributions.
It was related to an acquisition or merger. The company ended up with two plans and decided to transition everyone to the plan less desirable from the employees' viewpoint.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by Spirit Rider » Wed Oct 09, 2019 2:47 pm

OnTrack wrote:
Wed Oct 09, 2019 1:35 pm
Spirit Rider wrote:
Tue Oct 08, 2019 9:15 pm
OnTrack wrote:
Tue Oct 08, 2019 8:17 pm
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.
This would be a blatant violation of IRS regulations unless this was a part of certain acquisitions or mergers.

The only assets that would be eligible for rollover would be the same assets that would be eligible at any other time. Namely only rollover contributions, vested employer contributions and employee after-tax contributions.
It was related to an acquisition or merger. The company ended up with two plans and decided to transition everyone to the plan less desirable from the employees' viewpoint.
Then technically, they were separated from employment causing a distribution eligible event and then they were rehired to a "new" employer. So they really were not "employed by the same employer".

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by sschoe2 » Wed Oct 09, 2019 3:13 pm

I assume you need to sign something to authorize moving the existing funds from the old custodian to the new one and agreeing to the new terms. If you refuse to sign there might be an option for them to cut you a check or allow you to roll over the existing funds into an IRA. From that point any new contributions you need to decide if it is worth contributing to anything over the maximum employer match.

Other than that expressing your disappointment to the benefits team at your employer and lobbying them to find a better provider and have your peers do so as well is an option.

retiredjg
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by retiredjg » Wed Oct 09, 2019 3:31 pm

I don't think so....The law does not allow a person to roll their elective deferrals (the $19k a year) out of a 401k plan to an IRA while still working there unless they have reached the age of 59.5. And only some plans allow that.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by zlandar » Wed Oct 09, 2019 3:36 pm

sschoe2 wrote:
Wed Oct 09, 2019 3:13 pm
I assume you need to sign something to authorize moving the existing funds from the old custodian to the new one and agreeing to the new terms. If you refuse to sign there might be an option for them to cut you a check or allow you to roll over the existing funds into an IRA. From that point any new contributions you need to decide if it is worth contributing to anything over the maximum employer match.

Other than that expressing your disappointment to the benefits team at your employer and lobbying them to find a better provider and have your peers do so as well is an option.
401k is an employer-provided benefit. The employer does not need an employee's consent to move their money to a different provider. They get a notice of the change and that's it.

The system is pretty stupid IMO but it is what it is.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by ruralavalon » Wed Oct 09, 2019 3:38 pm

Hastelloy wrote:
Sun Oct 06, 2019 5:26 pm
My employer is switching our 401k plan administrators from Vanguard to Voya Financial. From everything I have read, this could be a very bad deal- Voya appears to have dramatically higher fees across the board, and I have very much enjoyed my experience with Vanguard. I'm unsure which funds I will have access to once the plan is finalized, but I am mentally bracing for much higher fees. Current 401k value: $100,000.

Emergency fund: 1 year
Debt: None
Tax Filing Status: Single
Tax Rate 20% Fed, 7.5% state
California
Age: 33
AA: 90/10
NW: $500,000
High savings rate, very low expenses.

Am I required to roll over my 401k into Voyas management and higher fees, or can I roll the 100K into a Vanguard IRA instead to maintain access to Vanguard funds? I'm unsure if I have other options or what the tax implications might be.

You folks have been a fantastic wealth of knowledge, thank you.
H
You cannot do an in-service rollover of elective contributions to an IRA until after age 59.5, and only if your 401k specifically allows that.

Wait to see that funds and expense ratios the new plan offers. Voya plans can sometimes be reasonable, depending on what the employer negotiates.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by sschoe2 » Wed Oct 09, 2019 3:51 pm

retiredjg wrote:
Wed Oct 09, 2019 3:31 pm
I don't think so....The law does not allow a person to roll their elective deferrals (the $19k a year) out of a 401k plan to an IRA while still working there unless they have reached the age of 59.5. And only some plans allow that.
Isn't that the basis of being able to do a megabackdoor Roth IRA

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by frcabot » Wed Oct 09, 2019 4:20 pm

sschoe2 wrote:
Wed Oct 09, 2019 3:51 pm
retiredjg wrote:
Wed Oct 09, 2019 3:31 pm
I don't think so....The law does not allow a person to roll their elective deferrals (the $19k a year) out of a 401k plan to an IRA while still working there unless they have reached the age of 59.5. And only some plans allow that.
Isn't that the basis of being able to do a megabackdoor Roth IRA
After-tax non-Roth contributions, and employer contributions are treated differently.

retiredjg
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Re: Employer switching to higher fee 401k admin. What would you do?

Post by retiredjg » Wed Oct 09, 2019 4:30 pm

sschoe2 wrote:
Wed Oct 09, 2019 3:51 pm
retiredjg wrote:
Wed Oct 09, 2019 3:31 pm
I don't think so....The law does not allow a person to roll their elective deferrals (the $19k a year) out of a 401k plan to an IRA while still working there unless they have reached the age of 59.5. And only some plans allow that.
Isn't that the basis of being able to do a megabackdoor Roth IRA
No. The money that is involved in the mega back door is not part of the "elective deferrals" (the $19k a year that can go into traditional 401k or Roth 401k or a combination of the two). The elective deferrals have to stay there (at least until 59.5).

The money for the mega back door is a different category of money that is governed be a different set of rules.

The law allows rolling out a few things - after-tax account (like the mega back door), employer contributions, and things that you have rolled into the 401k. And maybe forfeitures (I'm not sure). This does not mean that every plan will allow all of that, but they can if they want to.

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by sergeant » Wed Oct 09, 2019 4:46 pm

My DW's 457b is with VOYA. They have low-cost Vanguard funds and the admin fees are reasonable.

My 457b provider changed from ICMA-RC to MassMutual. I got all wound up expecting high fees and poor choices. Fees were reduced by more than 50% and there are far more choices, many of them Vanguard funds. The stable value option is excellent with guaranteed rates almost double what had been offered.
Lincoln 3 EOW!

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Re: Employer switching to higher fee 401k admin. What would you do?

Post by 401(k) Gee(k) » Wed Oct 09, 2019 5:23 pm

OnTrack wrote:
Wed Oct 09, 2019 1:35 pm
Spirit Rider wrote:
Tue Oct 08, 2019 9:15 pm
OnTrack wrote:
Tue Oct 08, 2019 8:17 pm
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.
This would be a blatant violation of IRS regulations unless this was a part of certain acquisitions or mergers.

The only assets that would be eligible for rollover would be the same assets that would be eligible at any other time. Namely only rollover contributions, vested employer contributions and employee after-tax contributions.
It was related to an acquisition or merger. The company ended up with two plans and decided to transition everyone to the plan less desirable from the employees' viewpoint.
This makes more sense that your 401k plan and your associated 401k account is transferring from Vanguard to Voya due to a merger or acquisition. This is a very uncommon movement (usually its the other way around). I would inquire with your plan administrator or HR if the prior plan was actually terminated. It probably was and this "transfer" is being sugar-coated. If fully terminated, this should make the plan assets distributable and eligible for IRA rollover and any unvested employer contributions fully vested. It is possible that it is a formal plan transfer but these are tricky and require more legal work than most employers care to undertake.

My guess is that there is a 401(k) advisor hack (that is well compensated directly or indirectly by Voya) who is involved with this and this is not being done by the letter of the law. If you ask some direct questions you may get to the heart of the matter. Ask for the plan amendment, termination action or the formal record of action and be sure to use the old plan name (probably under the old company name). If you arent satisfied with the response you can file a complaint with the Dept of Labor here: https://www.askebsa.dol.gov/WebIntake/Home.aspx

Spirit Rider
Posts: 11769
Joined: Fri Mar 02, 2007 2:39 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by Spirit Rider » Wed Oct 09, 2019 6:35 pm

401(k) Gee(k) wrote:
Wed Oct 09, 2019 5:23 pm
OnTrack wrote:
Wed Oct 09, 2019 1:35 pm
It was related to an acquisition or merger. The company ended up with two plans and decided to transition everyone to the plan less desirable from the employees' viewpoint.
This makes more sense that your 401k plan and your associated 401k account is transferring from Vanguard to Voya due to a merger or acquisition.
OnTrack is not the OP. His post has no relation to the Vanguard -> Voya 401k move.

OnTrack
Posts: 516
Joined: Wed Jan 20, 2016 11:16 pm

Re: Employer switching to higher fee 401k admin. What would you do?

Post by OnTrack » Thu Oct 10, 2019 2:47 pm

Spirit Rider wrote:
Wed Oct 09, 2019 2:47 pm
OnTrack wrote:
Wed Oct 09, 2019 1:35 pm
Spirit Rider wrote:
Tue Oct 08, 2019 9:15 pm
OnTrack wrote:
Tue Oct 08, 2019 8:17 pm
I know some people whose 401k plan was transferred from Fidelity to a less desirable provider. They were still employed by the same employer, but they were able to rollover their 401k assets to IRA accounts.
This would be a blatant violation of IRS regulations unless this was a part of certain acquisitions or mergers.

The only assets that would be eligible for rollover would be the same assets that would be eligible at any other time. Namely only rollover contributions, vested employer contributions and employee after-tax contributions.
It was related to an acquisition or merger. The company ended up with two plans and decided to transition everyone to the plan less desirable from the employees' viewpoint.
Then technically, they were separated from employment causing a distribution eligible event and then they were rehired to a "new" employer. So they really were not "employed by the same employer".
That may be the case, but as far as I know it was transparent to them.

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