My daughter's school district choose to change the trustee for their 403 & 457 plans, effective August, 2011. Since that time her contributions have been flowing to the new trustee, but the funds held by the previous trustee have yet to be rolled-over to the new trustee.
In visiting with the new trustee about the situation I was told that the former trustee has not released the funds as there is a close-out fee that was in the district's contract with the old trustee and thus far, the district has chosen not to pay the fee (I've been told it's 5% of the total assets) for they apparently do not have the funds. Truth be told, they probably were unaware of this when they changed trustees and had already contracted with/made deposits with the new trustee and now cannot afford what may be a 6+ figure fee for the total assets under management.
In the meantime, the contract with the previously trustee has a fee that can be levied against an individual's account funds after 12 months of inactivity. Also, according to the terms, unless my daughter quits working for the district, she can't roll-over the funds to say, an IRA. Here we are approaching the end of April and it appears they are at a stalemate... Looks like some mgr at the school district entered into a new contract agreement with their eyes wide-shut, in terms of their current trustee contract, and now there is this issue.
Is there anything in government regulations/etc. that place a time limit as to how much time is allowed for a school district to complete the transfer of funds from an old to a new trustee??
Note: if this were a business and some one made this sort of mistake, they'd probably fire the manager and apply the salary to pay/offset the fee....but then, I'm not sure a business would enter into such an agreement....