Notice Requirement for Fund Closure

[CO Bank]

An investment fund in our 401k plan is being liquidated on July 14th. We mailed a notice in early June, advising participants that assets in and elections to this fund will be mapped to another fund on July 14th. The new fund is already an investment option in our plan, but it is not the default investment option.

While transmitting contributions today, it was discovered that though the fund's liquidation date is July 14th, the fund stopped accepting new monies on June 12th.

The question now is what to do with these contributions. Should we direct them into the new fund, even though we informed participants the date was going to be July 14th? Or should we put it into the default investment option?

On a broader view, we have met the 30 day notice requirement for the blackout and the mapping of assets to the new fund, but we did not provide a 30 day notice for the fund stopping contributions. Wondering what liability we face and what resolution to take.

[mbozek]

Since the plan informed participants that amounts contributed to the fund will be mapped on July 14 why not transfer the contributions made after June 12th to the new fund since that's what they expect will happen?

The other option to consider is what would the plan have done with the contributions if it was aware that no new contributions could be contributed after June 12? Would the contributions have been put into the default option or held for the new fund?

Real question is what is the fiduciary risk if the contributions after june 12 are put into new fund and it declines. would this be an impudent act? If the funds are placed in default investment option there is no risk of loss.