Can my company force me to liquidate my 401(k) holdings?

[Guest jenadams99]

My company has just notified the employees that they will be changing our 401(k) administrators in the next month. We currently have a completely self-directed plan that allows us to choose whatever investment we like, including stocks and bonds. The new plan will have a limited number of mutual funds to select from.

I know the current scenario poses a tremendous liability for the trustees and I completely understand the need to change. However, I am very concerned about the cost associated with this transaction.

They have instructed us to liquidate our current positions by a short deadline or they will be liquidated for us. !? Since we have been choosing our own investments until now, some of us are faced with realizing losses on long-term positions that happen to be currently underwater. Not to mention the $30 commission attached to each trade, which could amount to several hundreds of dollars for some of us.

What I'd like to know is:

Can they legally force us to sell our equities?

Can they require us to sell them at our own expense (fees)?

Does ERISA give us any power to resist the changes?

Do we have the right to retain our current investments via roll-over or "freezing?"

Unfortunately, our HR person is not here to answer these questions today and the trustee just left town for a business trip. Any insights would be appreciated.

[Guest Greg W]

What I'd like to know is:

Can they legally force us to sell our equities? Yes

Can they require us to sell them at our own expense (fees)? Yes

Does ERISA give us any power to resist the changes? No

Do we have the right to retain our current investments via roll-over or "freezing?" No

Sorry these answers are so short, but basically the trustees of the plan have the power to make the changes. Unfortunately, these changes are never easy and can and do strain employee relations.

[JanetM]

jenadams99,

why not ask the employer to pay the fees since this is burden to participants. Instead of thinking of this as being totally negative, look at it as fresh start. You will be locking in losses, but from the sound of your post it might be good idea to dump the dogs.

[K-t-F]

"dumping the dogs" could be a tough pill to swallow... especially if the outlook is that the dogs will recover. An unfortunate situation.... I am sure the plan sponsor is looking at his/her fiduciary responsibility and doesn't want to be bitten by one of the Dogs!!

[E as in ERISA]

ERISA Section 404(a)(1)(B) requires the plan fiduciary to discharge its duties "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims."