401(k) transfer questions

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Topic Author
statsman
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401(k) transfer questions

Post by statsman »

My wife's 401(k) recently changed investment firms. The old firm sold the assets on 3/30. The new firm posted the transferred balance on 4/1. In most cases for the employees/ex-employees, the same investment options and balances were transferred over. There was a blackout period until last week in order to verify the transfers, move over any 401(k) loans, etc.

One of my wife's investments was in the Vanguard GNMA (VFIJX) fund. My expectation was since the fund was cashed out on 3/30 and that fund's March dividend was paid based on 3/31, she would receive a prorated amount through 3/30 for that fund. The problem is no one sees it. It isn't listed in the transaction history with the old firm, and there isn't a separate transfer with the new firm.

Each investment firm is pointing fingers at the other. It has been almost 5 weeks since the transfer started, so you would think someone would see this. I saved the number of VFIJX shares she had on 3/16 (when the blackout started), and with the closing price on 3/30, the balance transferred matches. The YTD dividends listed with the old firm is the sum of January and February 2021.

Am I wrong about expecting a prorated dividend for the VFIJX fund? If I am right, who should have received the dividend from Vanguard, the old firm or the new firm? If both sides point at each other and we are unable to get some sort of resolution, what does my wife do next?
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retired@50
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Re: 401(k) transfer questions

Post by retired@50 »

Does the new account still have the same ticker / fund? VFIJX.

I'd call Vanguard and start asking questions about whether or not you're entitled to the pro-rated portion of interest. As I understand it, some funds accumulate interest daily, payable at month end. Other funds don't. You need to know which kind of fund VFIJX is.

The page for that fund shows a record and reinvest date of 3/31 with a payable date of 4/1.

Link: https://investor.vanguard.com/mutual-fu ... ions/vfijx

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This is one person's opinion. Nothing more.
Topic Author
statsman
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Re: 401(k) transfer questions

Post by statsman »

VFIJX is still available with the new firm. I believe VFIJX pays prorated dividends on shares that are bought or sold within a month.
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statsman
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Re: 401(k) transfer questions

Post by statsman »

A phone call with Vanguard this morning confirmed that the Vanguard GNMA fund (VFIJX) does accrue interest daily. Since it was sold while held with the original investment firm, they should have received the prorated (30/31) interest for the month of March, and that amount should have been forwarded to the new investment firm.

My contention is the dividend transfer should have happened during the 401(k) blackout period that extended through most of April 2021. I also have to believe my wife is not the only employee/ex-employee that this has happened to.
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retired@50
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Re: 401(k) transfer questions

Post by retired@50 »

statsman wrote: Tue May 04, 2021 7:52 am A phone call with Vanguard this morning confirmed that the Vanguard GNMA fund (VFIJX) does accrue interest daily. Since it was sold while held with the original investment firm, they should have received the prorated (30/31) interest for the month of March, and that amount should have been forwarded to the new investment firm.

My contention is the dividend transfer should have happened during the 401(k) blackout period that extended through most of April 2021. I also have to believe my wife is not the only employee/ex-employee that this has happened to.
Armed with this new information about the daily accrual, you now have a solid argument to take to the 401k plan administrator. It's probably just some sort of back-office snafu, but nonetheless your wife has the money coming to her. And I doubt the custodian(s) are interested in being sued or taken to court over an ERISA violation of some kind.

I'd start calmly with people within your own company and get them on your side of the argument, then have some higher-ups within your company start making demands of the old and/or new 401k custodian(s).

Regards,
This is one person's opinion. Nothing more.
Topic Author
statsman
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Re: 401(k) transfer questions

Post by statsman »

My wife will be contacting the employer later today (again, she's retired). Looking over the previous investment firm's fund options, nearly all of them paid dividends before the end of the quarter (March 31). That includes the stock, mixed funds with stocks, and the managed income funds like Dodge & Cox Income Fund (DODIX), which paid around March 26, if there were dividends to distribute.

The only funds available in the previous investment firm that paid at the end of the month and accrued interest daily was the Vanguard GNMA (VFIJX) fund and a money market fund. I would like to believe they would have caught the money market fund as being a daily fund with prorated dividends. The issue with VFIJX might be an oversight, albeit a sloppy one.
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anon_investor
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Re: 401(k) transfer questions

Post by anon_investor »

statsman wrote: Tue May 04, 2021 1:06 pm My wife will be contacting the employer later today (again, she's retired). Looking over the previous investment firm's fund options, nearly all of them paid dividends before the end of the quarter (March 31). That includes the stock, mixed funds with stocks, and the managed income funds like Dodge & Cox Income Fund (DODIX), which paid around March 26, if there were dividends to distribute.

The only funds available in the previous investment firm that paid at the end of the month and accrued interest daily was the Vanguard GNMA (VFIJX) fund and a money market fund. I would like to believe they would have caught the money market fund as being a daily fund with prorated dividends. The issue with VFIJX might be an oversight, albeit a sloppy one.
Hopefully your wife can get it sorted out. Since she is retired, have you considered rolling over her 401k to an IRA to avoid these kind of issues again?
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statsman
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Re: 401(k) transfer questions

Post by statsman »

anon_investor wrote: Tue May 04, 2021 1:12 pm Hopefully your wife can get it sorted out. Since she is retired, have you considered rolling over her 401k to an IRA to avoid these kind of issues again?
We had been thinking about it for quite some time. There were always reasons to procrastinate. Actually, if she had known earlier about the 401(k) plan move, she would have rolled over her 401(k) to an IRA prior to the plan move. They didn't send a notice out to ex-employees about the plan move until about 3-4 weeks before the blackout period started.

And as luck would have it, the major storm in February 2021 that rolled through Texas halted the movement of mail for at least 10 days, right when the notice was mailed. That left my wife with just under two weeks to perform a rollover. I didn't trust the previous investment firm to make this happen in time. The reason for this thread supports that belief.

An IRA has already been opened with the new investment firm. Once this issue with the 401(k) and VFIJX has been resolved, my wife will perform a rollover into a money market fund in the IRA, then choose some new funds to invest in.
Topic Author
statsman
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Re: 401(k) transfer questions

Post by statsman »

Unbelievably (or maybe not), the old investment firm (Newport) has pushed us to talk with the HR department of my wife's company (as an ex-employee), giving us no other direction or comment other than that. I think they truly believe either there wasn't supposed to be a prorated dividend from the VFIJX fund, or they're expecting my wife to eat the loss.
lakpr
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Re: 401(k) transfer questions

Post by lakpr »

statsman wrote: Fri May 07, 2021 10:55 am Unbelievably (or maybe not), the old investment firm (Newport) has pushed us to talk with the HR department of my wife's company (as an ex-employee), giving us no other direction or comment other than that. I think they truly believe either there wasn't supposed to be a prorated dividend from the VFIJX fund, or they're expecting my wife to eat the loss.
I would say this does call for filing a CFPB complaint. Not a personal experience, but I read on this and other forums that when complaints are made to CFPB, financial institutions do tend to take them seriously and are forced to respond.
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statsman
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Re: 401(k) transfer questions

Post by statsman »

lakpr wrote: Fri May 07, 2021 11:11 amI would say this does call for filing a CFPB complaint. Not a personal experience, but I read on this and other forums that when complaints are made to CFPB, financial institutions do tend to take them seriously and are forced to respond.
That may be my wife's next step. The person in the company's HR department my wife is in contact with is quite good, and they spoke to each other within the hour. My wife will let the HR rep attempt to contact Newport about this, especially when it might impact other employees/ex-employees.
GG1273
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Re: 401(k) transfer questions

Post by GG1273 »

statsman wrote: Fri May 07, 2021 11:49 am
lakpr wrote: Fri May 07, 2021 11:11 amI would say this does call for filing a CFPB complaint. Not a personal experience, but I read on this and other forums that when complaints are made to CFPB, financial institutions do tend to take them seriously and are forced to respond.
That may be my wife's next step. The person in the company's HR department my wife is in contact with is quite good, and they spoke to each other within the hour. My wife will let the HR rep attempt to contact Newport about this, especially when it might impact other employees/ex-employees.
Was it direct with Vanguard originally and moved to Newport? Newport was assigned to manage retirement programs for Vanguard, same thing happened to us in a 403b about 5 years ago, but we had option to leave with "vanguard" instead of rolling over to MetLife's high expense options. Good move to get HR involved as Newport is relying on them for the administration fees being paid!
Topic Author
statsman
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Re: 401(k) transfer questions

Post by statsman »

GG1273 wrote: Fri May 07, 2021 11:56 am Was it direct with Vanguard originally and moved to Newport? Newport was assigned to manage retirement programs for Vanguard, same thing happened to us in a 403b about 5 years ago, but we had option to leave with "vanguard" instead of rolling over to MetLife's high expense options. Good move to get HR involved as Newport is relying on them for the administration fees being paid!
Newport managed the 401(k) plan. VFIJX was one of the investment options.
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