401(k) outside asset

[John geer]

We have client merging pst plan into existing 401(k) with American funds. (Pretty close to open architecture but bundled)  Using Capital Bank and Trust as directed trustee. All work is complete and 25 million in assets liquidated ready to transfer.  At the 11th hour we have discovered small Wells Fargo stable value position that will not liquidate since this is not a plan termination but merger and AF will not hold or record keep.  They say can be held as an outside asset until maturity in 2018(we would actually liquidate sooner for distributions but can not now due to blackout) they will include the value in their reporting if provided. Need to know who should be custodian of this asset etc.? Anyone with any experience on issue like this? Would appreciate your comments.

[TPAJake]

I know I've heard advisors talk about this issue on implementation calls, but I'm sorry to say I don't remember what their solution was.  You are not alone in having this issue, though.

[401king]

In the only case I've had this happen the client was able to take an in-service distribution to cover the illiquid asset so it was resolved prior to the wire. 

[MoJo]

We see this often.  Have an individual (corp exec) serve as "trustee" of the outside asset - and then put a lot of reminders in the file that the asset exists, needs to be recordkept, and is available for distributions.  Most of the time we get a monthly update on the value and plug it into Omni to make it visible to participants.

[Luke Bailey]

MoJo's response is the only solution I can think of, but I have no idea how the recordkeeping/admin would be done on this asset if AF refuses to do it. Will be interested if others have a solution.

[BG5150]

Can't they liquidate the asset and take the market value adjustment?

 

[Doghouse]

We had a similar situation. No MV adjustment option was available. There was only a handful of participants involved so we contacted them prior to the transfer and told them that their balances in the SV fund would be updated only quarterly and would not be reflected on their statements, and if this was unsatisfactory, it would be a good time to consider transferring out (which seemed to be allowed). Besides the fact that no one acted based on this information, there haven't been any complaints either.

[MoJo]

22 minutes ago, BG5150 said:

Can't they liquidate the asset and take the market value adjustment?

 

The Wells Fargo SVF is a synthetic GIC- not a general account product (which would probably have a market value adjustment option).  Most synthetics have a delayed payout only - to preserve the liquidity of the fund for other investors.

[Luke Bailey]

What Doghouse has suggested was what I was guessing might be the only option. Should work if relatively small number of participants.

[David74]

I think Doghouse gave the solution. With a smaller number of participants, it should be easier to communicate and keep everyone updated. But the point that statements will not be updated kind of feels uneasy. Anyways, wish you good luck finding the solution.