termination of old pension plan

[Guest michael4509]

i am the owner of a small company of 35 people.

last june we began the procedure to end our old pension plan, established in 1987. we wanted to rollover the funds into a 401k plan where the employees would be able to direct the type of fund

here is the issue. when we began the rollover process, we had the existing pension plan put the money into a money market account. the money remained there for the 3rd quarter OF 2000. BUT, in the 4th quarter, the old plan, without our consent or knowledge moved the money back into their stock fund. the market, as we all know, suffered losses, hence all the employee accounts suffered losses.we are currently waiting for a letter of determination from the irs to have our old plan terminated and to put this issue to rest, but,

we were supposed to be insulated from any potential loss because the money was in a fixed income money market. the million dollar question is, WERE THEY ALLOWED TO MOVE THE MONEY BACK INTO THE STOCK FUND WITHOUT OUR CONSENT OR KNOWLEDGE?

[MJ Hartman]

who is "the old plan?" is it your investment advisor, or trustees of the plan? are you a trustee with investment authority? are you concerned about your fiduciary responsibilities as a trustee or are you trying to determine who is responsible for transferring the accounts back into the stock accounts without your permission? Your use of the term "old plan" is confusing.

[Guest michael4509]

i am sorry for the confusion. i am learning about defined contribution plans/401K's and plan terminations on the fly.

the old plan is, i think, a defined contribution profit sharing plan established in 1987. the fiduciary/trustee is someone at the plan. i, the owner of the company, and the employees did not have the ability to direct where the funds were invested. (this is why i wanted to switch to a 401K plan)

the 401K plan was established on 7/1/00. the plan was to "rollover" the funds from the "old" plan to the 401K. in the interim, we requested that the funds from the "old" plan be deposited into a fixed return money market, where the funds would remain until the new 401K plan could accept the rollover.

this was done. the funds remained in a money market for the 3rd quarter of 2000.

however, the new 401k plan could not accept the after tax money, so we filed for a letter of determination from the irs. this was the only way that the "old" plan would let the money out of the plan.

when we filed for the letter of determination in the 4th quarter. the old fund moved the money out of the money market and back into the general stock fund. this is the crux of the matter. the old plan says that they had to do that, without ever really giving a reason. the fund has since lost money, like most since that time.

how could they just move the money back into the general stock fund without our consent?

[Earl]

There are a lot of issues in your post that are confusing, however it seems that you have employed a discretionary Institutional Trustee of some kind. As such it is their duty to invest prudently, yadda, yadda, yadda.

Your request to invest the money a certain way would not be binding or controling. In fact it would be their duty to decide how the money should be invested.

If you wanted to control the investment of the money, you should have fired them and appointed yourself as Trustee.

[Guest michael4509]

hmmm...now that was something that i did not think of, or think was an option. "fire the trustee." wish that i thought of that, or was advised of that prior.

yes, i do agree that my post is confusing. frankly, the whole matter is comfusing to me.

[Guest Tom Geer]

There is another way of looking at this, as follows:

There is absolutely no requirement that a plan ever get a determination letter. The "old plan" trustee was insisting you get one to protect its business interests, because a determination on termination effectively shuts the doors on later audits. If so, the trustee should have advised you of all the implication of your decisions (get the leter, get an opinion of counsel that the plan is qualified, terminate them as trustee, etc.), including how the funds would be invested in the interim. So, the claim may not be breach of fiduciary duty, but rather malpractice as a benefits advisor.

The other point to check on is how much money the trustee made on the change in investments. Were its fees higher? My momma done told me to expect the worst from poeple, so I'd bet they were.

[david rigby]

Follow the money!

[Guest michael4509]

tom...THANKS. i don't think that they made any money on the change. i paid only a standard termination charge, maybe $500...and then i moved the plan to a different administrator where the employee directs the money, not the plan.

"If so, the trustee should have advised you of all the implication of your decisions (get the leter, get an opinion of counsel that the plan is qualified, terminate them as trustee, etc.), including how the funds would be invested in the interim. So, the claim may not be breach of fiduciary duty, but rather malpractice as a benefits advisor." YOUR WORDS, BUT MY OPINION AS WELL!

because of this site, i found out that a determination letter was not required...20/20 hindsight.

would it be appropriate to contact the DOL?

[david rigby]

It strikes me that the best insurance you can get is to discuss your options with a competent attorney. I suggest using one who has more than a little experience with ERISA and employee benefit issues. You definitely want to do this before calling the DOL!

[Guest michael4509]

pax...i am going to do just that. thank you for the insight.