Transfers of Employee Accounts to New Administrator

[waid10]

My employer is a non-governmental tax-exempt with a 457(b) Plan. The employer recently terminated their 457(b) Plan administration contract with Administrator A. They have engaged Administrator B to handle the 457(b) Plan. The employer moved all of the participant accounts and investments to B without consent of employees/participants. Was this permissible? What if I had wanted to keep my money with A? Can anyone direct me to the rules on this?

Thanks.

[QDROphile]

It isn't your money. The money belongs to your employer. You simply have your employer's promise to pay you some amount, if the employer can do so at the appointed time. It is nice to know that your employer is saving money now for the purpose of paying you later. The employer can keep its money wherever it wants.

If the employer created a grantor trust to hold the funds, any transfer of of funds would be subject to the terms of the trust.

It is unlikely that you have any rights except to receive the amount that is promised under plan terms. However, plan terms might say how the earnings factor of the benefit is to be calculated and how that can be changed.

[waid10]

Is your answer different if I tell you that the 457(b) Plan allows deferrals of participant compensation?

Is your answer different if I also tell you that I am retired?

[mbozek]

You need to review the plan document to see what are the rules regarding investment decisions under the plan. Unless the plan permits employees to self direct investments without control by the employer, the employer will be able to change investments without the consent of the participants.

[JanetM]

Sure the answer would be the same either way. Participants can't decide were the assets will be kept or who will do the admin.

[waid10]

The Plan does permit participant-directed investments. However, the Plan document does state that the investments selected must be acceptable to the Employer. Also, the Plan document states that the Employer intends to invest contributions according to the participant's direction, but that the Employer reserves the right to invest the contributions without regard to such directions.

So it appears that the Employer can put the funds wherever it chooses. I would think that since I am retired and have vested (on termination) in the funds, I now have the power to keep the funds where I want them. Am I off base here?

[QDROphile]

Your retirement does not change the nature or terms of the plan.

[waid10]

Is there any type of Notice that must be given to participants prior to transferring the funds?

I had been deferring my compensation over a period of several months. I retired, so I vested in the plan. I thought my old employer had to provide a 45-day Notice if they moved the funds to a different administrator.

Any thoughts?

[QDROphile]

You may be thinking about what is commonly called a "blackout notice," which does not apply under your circumstances. Unless you try to understand that a 457(b) plan is fundamentally different form a 401(k) plan or 403(b) plan, you are going to find lots of things that seem wrong to you.

The fact that you elcted to defer income does not make any difference. The money is not yours or even legally set aside for your benefit. Your employer made a promise to pay certain amounts at certain times. The employer is in control of how it manages its money in a way that you hope will allow it to live up to its promise.