What happens if your 401k Plan Administrator has a bank run?

[JamesNYC]

The recent news around SVB has me thinking about the safety of my bank accounts.

My balances in 401k and other retirement accounts are mostly with Fidelity. They are invested in mutual funds. Some of the money is in Fidelity run mutual funds. Others are Vanguard.

If Fidelity were to experience a bank run and become insolvent, what would happen to my assets within those accounts?

Is there any risk to the asset owner if the plan administrator runs into trouble?

[ClassII]

Nothing.

[Geologist]

How could Fidelity undergo a bank run? Fidelity isn't a bank.

Edit: You wrote that you are worried about the safety of your bank accounts. Then you write about your 401k. Your 401k is not a bank account.

[bouncyboglehead]

You can read more about why your brokerage account is safe here:
https://thefinancebuff.com/brokerage-ac ... -fdic.html

[lthenderson]

Banks can have runs because they don't keep 100% of your money in the bank at any given time. Your 401(k) is invested and 100% of it is available 100% of the time so there can't be a run.

[JoMoney]

Fidelity is likely the "Administrator" of your 401k, that doesn't mean they're the "Custodian" of your plans assets, just that they are providing various accounting/record keeping, reporting/filings, and making sure the plan is operated in compliance with various legal requirements and the plans own "plan documents."

If your plan offers a "brokerage window" in it, for the amounts held in the brokerage, the Fidelity broker-dealer which is a separate entity than the group providing record-keeping services for your 401k may have custody of the securities you hold in the brokerage window.

Fidelity Investments also offers institutional clearing & custody services, and might be (but not absolutely) offering custodian services to your plan, but it is a separate operation from the 401k plan administration, and also separate from the broker-dealer, but they are all subsidiaries under the larger "Fidelity Investments" company umbrella and sometimes offered as integrated services.

If your plans administrator has a "bank run" it's not clear what you mean... it's not a bank... A "run" on the administrator would seem to be lots of employers deciding to transfer who does the reporting and record-keeping for the plan. It has nothing to do with the assets in the plan, or the value of those assets. Which would probably be annoying if you liked your current administrators web-site, but is a non-event.

[Brianmcg321]

There’s no such thing.

[ebeb]

You can lose money in 401k if you sell funds below cost price but you cannot lose in a 401k run as the custodian cannot take your funds and invest it in their own accounts unlike bank deposits(so we need fdic insurance upto 250k). I dont think this has happened in USA which will be covered by SIPC insurance, however, there was one small India stock broking company Karvy who pledged client funds to get loans and was quickly shutdown by regulators: https://en.wikipedia.org/wiki/Karvy_Cor ... %5Bedit%5D

[nisiprius]

Banks can have runs because they don't keep 100% of your money in the bank at any given time. Your 401(k) is invested and 100% of it is available 100% of the time so there can't be a run.

This.

In a normal brokerage "cash account," 100% of the shares you buy--mutual funds, ETFs, individual stocks and bonds--are there, all the time. Each share could fluctuate in value, but that's a separate thing. If plan participants had a total of a million shares of the Fidelity Total Stock Market Index Fund, FSKAX, and they all wanted those million shares at once, there would be no problem because all the shares are there. This is completely different from the way a bank works. They are supposed to work differently.

[JamesNYC]

Thank you all for your replies. I understand.