Help with 401K annuity roll-over

[Guest heike]

My husbands company changed from Lincoln Financial 401K annuity to Hilliard Lyons 401K retirement plan.

During the Q&A sessin with the investment advisors from HL and all participants in the plan, I ask about possible cost of this kind of transfer. We were assured that no cost was involved.

We all signed the roll-over forms, and after everything was a done deal..... 3% surrender charge for everybody.

We are steamed!!!

Doesn't HL have the obligation to inform us about this? Inform themselfes before taking over and rolling over a retirement plan for a whole company?

During my first phone call they told me that, in their contact with LF they were told that our old plan existed long enough that no surrender charges were due. He told me to send in copies of my statement, they would check into this.

In their written answer to my letter, the investment advosor implies that I misunderstood their answer to my question during the initial Q&A. They meant that all transfer within their plan was free. They have no control over the other companys fee structure. No more mentioning of contacting LF beforehand. No it's all my misunderstanding and confusion...

I understand that they have no control over other companys, but ...

were THEY not obligated to inform us about any surrender charges BEFORE we all signed on with them?

were THEY not obligated to check with the old plan about fees?

were they not obligated to know about fees?

Who can I contact to lodge a formal complaint?

Any tips, hints, help... would be appreciated.

Thanks

Heike

[QDROphile]

It will be very difficult to pin any liability on the new employer or the fiduciaries of the new employer's plan unless you were implored to rollover the funds and you can show the the new employer or fiduciary undertook the responsibility to advise you about all aspects. Mere offering of explanations about the transactions and encouragement will not be enough. The new employer is not obligated to tell you about the old plan if the new employer is unrelated to the former employer or plan and it is unlikely that the new employer undertook that responsibility.

You may have recourse against the fiduciaries of the LF plan for failure to disclose a material feature of the investments and consequences of an election to take a distribution, but the going won't be easy. You should check the summary plan description of the plan and all materials that were provided and available concerning investment of plan assets, and all materials provided or referred to in connection with the transition before you put any money on the line in pursuit of your claim. All sorts of facts and circumstances will be relevant, including ones you may not recognize currently. You will need to follow the plan's formal claims procedures for any claim relating to benefits, including amount of benefits; woe (and whoa!) to you if you disregard the procedures.

You will have less chance of success in any event if you go at it alone. You should consider collecting all similarly situated particpants.

You may seek help from the Department of Labor. The Department has offices in major cities. The Department has a website: www.dol.gov/ebsa.

[GBurns]

Check to see if you or any of the other affected participants have anything in writing. Get the agent's name, dates, brochures, enrollment material etc together. Especially get out your copy of the illustration and the Replacement Form.

Then have each person contact your state Dept of Insurance and file a complaint. In some states there might be a separate Dept that regulates Securities including Variable Annuities, so you might have to file 2 complaints. This will get action.

Variable Annuities and Group Annuities are regulated by the State Dept of Insurance (or equivalent) and the agents are licensed by that Dept. Most state regulations required an illustration or comparison that should include or cause surrender charges from the old annuity to have been disclosed or discussed. The new company although not responsible for those charges has to make you aware that they exist. This is part of what is know as the "suitability" requirement. The new agent could not have scaled this "suitability" hurdle without discussing in some way that you might be subjected to surrender charges by LF. Additionally there are prescribed formats for illustrations and most would also cause awareness of these surrender charges.

There is also in many states a Replacement Form which has to be filled out whenever most insurance products are being replaced. You should have a copy. This forms also usually causes disclosure of surrender charges. In many states the sale of the new product is invalid if the Replacement Form is not filled out and filed.

You also might want to seek help from the old agent. Even though he/she has lost the sale he/she should be willing to help you make the new company toe the line and do things properly.

*******

I should have also suggested that you contact the NASD (National Association of Securities Dealers). They might have a local office. Some VAs used in 401(k) Plans are Registered and so would fall under SEC and NASD regulation. Here the suitability and disclosure requirements etc are even stricter.

[Guest heike]

Thanks for the help.

I found out that the mistake was made by my husbands company during the set-up of first plan. They did not even know that the 401K was invested in an annuity. They just trusted the salesman!! All the stuff in writing was with my husbands company, nothing was given to the employees. All the information about fees was buried in the small print, which my husbands company never realized was there. It's a small company, they have no clue about any of this stuff, they just got taken by their insurance salesman.

During the roll-over process his company was made aware of the surrender fee, but decided it was better to eat the cost than stay with the old plan. My husbands company just never bothered to inform anybody about their decision. So when Hilliard Lyon had the Q&A scession with everybody, they assumed we already knew about the surrender charge.

Well,.. live and learn.

I hope that HL is the better for the 401K, and that we will make up the fees in no time.