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waldo

Help! My Wife's 403b Is Being Highjacked

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We just received notice from my wife's employer (a hospital), that good news, they were going to restrict what funds we can contribute to within the Fidelity family. Their choices are not great- a lot of 3 stars (Morningstar). Meanwhile, I've spent a great deal of time and research building this portfolio and don't want to change a winning combination. What's worse, they are saying that they will automatically transfer our existing money out of our choice of funds into their "choices". Now, since the vast majority of the money is our contribution, not theirs, this seems rather outrageous. Any suggestions as to what I can do? Thanks for your help!!!

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You don't have many options here other than to complain. The hospital runs the 403(b) plan and they are responsible for it, meaning they have the final say on what funds are available.

 

ScottyD

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Thanks for the response. As I remember, isn't there a way to set up another account and transfer the funds, still under the umbrella of a tax deferred account?

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Guest Sierra

Thanks for the response. As I remember, isn't there a way to set up another account and transfer the funds, still under the umbrella of a tax deferred account?

 

 

An intelligent guess tells me you are referring to Revenue Ruling 90-24 which heretofore permitted tax free transfers among section 403(b) investments. RR 90-24 has been repealed.

 

You may rollover your 403b to another pre-tax account upon the earliest of meeting one of the following events: attainment of age 59-1/2, separation from service, death or disability.

 

Joel L. Frank

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Thanks for the replies. When I called her HR department, they told me that all funds will be switched to their preselected funds, but there would be a brokerage option that would allow participants to move the money to what they deemed best. There will be a "small fee" involved, but it is better than nothing. I still am not sure how they'll handle closed funds. I was told that most people were not using the 403 option/matching funds to its fullest, and many who were were making poor decisions. (Not sure whose opinion this was). So this is why this policy has been instituted. Anyone have a similar experience and, if so, what was the outcome. BTW, they are going to have a meeting for further explanation and reps from each of the insurance and fund families. For the record, the brokerage option was not mentioned in the original material sent to my wife.

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Waldo,

 

First a three star fund is not necessarily a bad fund. Secondly , are you sure they can force you to move money out of an account you are already in? Thats sounds a bit ridiculous even though they can stop further contributions to those funds. Call fidelity.

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Waldo,

 

First a three star fund is not necessarily a bad fund. Secondly , are you sure they can force you to move money out of an account you are already in? Thats sounds a bit ridiculous even though they can stop further contributions to those funds. Call fidelity.

 

Transferring accounts balances to new funds selected by the plan is called fund mapping and it is a common occurance when 401k plans change mutual funds available as plan investments. Fund mapping is not available when the contribiutions are made to annuity contracts owned by the employee.

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Thanks for all your responses. Yes, three stars is not necessarily bad, when you freely choose them. However, when you're invested in funds doing far better in rates of return, it is a problem. What will be interesting is how Fidelity will handle some of the funds we have that are closed. Additionally, I'll be curious to see what they charge me to reconstruct something already extant. I did call Fidelity, and they were arms length about the whole thing- told me to go back and talk to the employer.

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Waldo

 

Pardon my ignorance if it shows but I would fight that tooth and nail. They should not have the jurisdiction/ authority to move money already invested elsewhere. Thats your money and your decision.

What gives them the right to mess with your assett allocation and dictate it? Who is in charge of making these allocation/fund decisions? What are his credentials? How can one size fits all work??

 

 

Sorry but I wouldn't let them do that. I would just forget the 403b and send them a message and it wouldn't be pleasant.

 

 

Tony

 

 

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Well, that's the question, isn't it? I'm not sure I have any recourse here. Of course, I don't want them to move funds around, since this against our wishes. I certainly didn't ask them to take control, but what can be done? Yes, this is ridiculous, but that is why I posted this topic. Thanks for your input.

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My opinion is that you have little recourse here. General Rule: If you want a high degree of investment flexibility - avoid employer-sponsored retirement plans. Usually participation in the Hospital 403(b) Plan is voluntary. Is that your situation too?

 

Key question: Does the Hospital provide any sort of contribution - fixed, matching or otherwise?

 

Your wife has an account within the Hospital Plan. Technically, the Hospital Plan owns all the assets of the Plan (even voluntary contributions are owned by the plan - the contributor has a legal interest in the plan - not the underlying investment funds). If your response to the question above is yes, then there is strong likelihood that the Hospital Plan is a so-called ERISA Plan & the Hospital has a fiduciary duty to Plan Participants. The Hospital has a duty to operate the plan for the best interest of all participants, which includes compliance with regulations (which may be also be part of the reason why investment fund choices are being limited).

 

If you believe that the Hospital has a fiduciary duty & has violated its fiduciary duty (by modifying the investment fund choices) you can file a complaint with the Department of Labor.

 

Talk with the fund companies about how to end-run closed funds; they may make an exception in your situation and let you re-establish the positions in the brokerage account.

 

Good Luck with it!

 

Danc

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In fact, the hospital does contribute to her 403, so it may have some control. I would agree, I find it pretty unbelievable that they can arbitrarily move her funds around. I might understand future contributions, but stuff already in accounts? Hard to comprehend. Hopefully, Fidelity will be useful in fixing what could potentially a mess. Going to the Dept. of Labor sounds like a long s######, since it probably would take a great deal of time and effort. Meanwhile, the damage would already be done. And that would assume a decision in our favor.

 

 

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In fact, the hospital does contribute to her 403, so it may have some control. I would agree, I find it pretty unbelievable that they can arbitrarily move her funds around. I might understand future contributions, but stuff already in accounts? Hard to comprehend. Hopefully, Fidelity will be useful in fixing what could potentially a mess. Going to the Dept. of Labor sounds like a long s######, since it probably would take a great deal of time and effort. Meanwhile, the damage would already be done. And that would assume a decision in our favor.

 

 

Fidelity is not the plan fiduciary and takes instructions from the plan fiduciary who makes the decision to map the existing funds to the new funds. It is possible that Fidelity may have decided to change the menu of funds available to the hospital which precipated the need for the plan fiduciary transfer the accounts to new funds.

 

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Not according to Fidelity, when I called them. Actually, they were the first I called, and they told me to talk with her hospital's HR Dept .

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