Weird issue with fund group

[stevena]

I have an odd situation I have never run into before with a fund group.

Company "A" has money at two fund groups, "Fund Group A" and "Fund Group B". Employee has money in both places. She was paid out of one fund group "A" one year ago (but chooses to leave her money in the other fund group).

A year later, employer decides to move all plan money from "Fund Group B" to "Fund Group A". Of course, employee (who was previously paid out of "Fund Group A" has money at "Fund Group B". Money transfers over for her along with the rest of the plan funds.

Here is the odd part: Fund group A will not take her money unless the trustee sends them something saying she is active and rehired!

We told them that she is not rehired but wants to keep her funds in the plan. But, they insist that they have a "policy" that once someone is paid out, any money which comes in after that will be paid out according to the prior payout.

They are insisting that they are cutting a check to the employee. DOes this sound nuts to you???

Thanks.

[Brian Gallagher]

Couple of questions:

Are current participants allowed to move money back and forth between the two fund companies at will?

Is there anything in the service contract w/ company A that says only active people can transfer money in and out?

[david rigby]

While reviewing the terms of that service contract, also check to see if it conflicts with plan provisions, and if the contract includes a clause that states the plan provisions will override in event of a conflict.

[Bird]

Sure, it sounds nuts, but at the same time not surprising. Fund companies want to play the game but also want to make up their own rules.

I think their policy might be permitted if it is also reflected in the plan and/or SPD, but odds are it's not. The obvious answer, in a perfect world, is to cut Fund Group A out of the investment options entirely so you don't have to deal with them. I know it's not necessarily that easy.

[stevena]

Are current participants allowed to move money back and forth between the two fund companies at will?

No. The reason there was money at Fund Group A and Fund Group B was because the sponsor wanted to transfer all the funds to Group A, but Group B had back end charges that they were waiting to dry out before they moved the money.

Is there anything in the service contract w/ company A that says only active people can transfer money in and out?

Not that I can see.