Vanguard dragging their feet

[Jeanie]

My husband passed away on 2/19/18.  I was able to access his account 2 days later and saw the amount that was in his 401k at Vanguard.  Once I notified Vanguard of his death, I was locked out of the account.  I am the beneficiary.  I repeatedly called to try to get information about how to proceed with my claim.  Several calls resulted in un-returned voice mails.  I finally was directed to someone in "Life Events" and that person was on vacation.  I was told by husband's employer's Human Resources department that I would need the death certificate. When I received that I sent it to Vanguard (on 3/22/18).  I called Friday (3/29/18) and they were closed for holiday.  I called today (4/2/18) and finally got a call back telling me that in 3 to 5 days I will have access to the account and was given the amount that is there now.  In all this time (6 weeks since his death), my husband's 401k has decreased by $8000 from the amount I saw when I viewed the account shortly after his death.  It was my understanding that his account would be frozen as of the day of his death.  Instead it remained  active.  Is this the way it is usually handled or should they have frozen the account?

 

[ERISAAPPLE]

Contact the Department of Labor.  They should be able to help you.  Also, send the plan administrator a written benefit claim and include an original death certificate.  

[Jeanie]

Thank you.  I had already sent the benefit claim and death certificate as of 3/22/18.  When I finally reached someone today they said it would take 3 to 5 days to process and then I can access the account again.  My biggest concern is them leaving the account active after my husband's death instead of freezing it.  It continued to be at the mercy of Vanguard and the markets after he died and has been reduced by $8000 during that time, while I was locked out of monitoring the account.  I will definitely contact his employer's  benefits department as well as the Department of Labor.  

[david rigby]

Consider the proper understanding of "freezing" an account.  It's possible the account was "frozen", in the sense that no one else (ie, other than the person whose name is on the account) has access.  The term "freeze" will (probably) not include an action that transfers the invested amounts into another type of investment.  In other words, the amount remains invested, which means it can go up or down.

[ESOP Guy]

I agree with David "freezing" did not mean the amount of money in the account will not change. 

I would not recommend going to the DOL first if you still think you have an issue.  If you think Vanguard was too slow or non-responsive I would talk to the HR department at your spouse's former employer.  They are the ones that work with Vanguard and they are the ones who hired Vanguard.  Vanguard has an incentive to keep them happy.  

My condolences on your loss. 

[ERISAAPPLE]

I hate to say it Jeanie but it is going to be very difficult for you to recover the market losses.  A 401(k) plan is an individual account plan and the value of the benefits depends on the value of the investments held in the account - in this case most likely Vanguard mutual funds.  As the stock market goes up and down, the value of those investments will go up and down.  In all probability, your late husband selected those investments, and the employer will not be responsible for his selection.  Vanguard would also not be responsible for the value of the investments going down.  Your late husband's employer or Vanguard or both (most likely the employer, but not likely Vanguard) would be responsible for an unreasonable delay in giving you control over the investments in the account.   The question in lay person's terms is going to be whether anybody acted unreasonably in delaying giving you access.  I think depending on the circumstances a delay of almost two months could be considered unreasonable.  For example, when you first called and notified them of the death, and if you told them you are the surviving spouse, if they just sat on their hands and did nothing for almost two months, that could be considered unreasonable.  The problem though is neither Vanguard nor the employer will likely just roll over.  It will be extremely difficult to get them to budge.  They have the advantage and they know it.  In these types of cases, that involve investment disputes, it is highly unlikely the DOL will get involved.  They will say it is a litigation matter and will not feel it is worth their time or resources.  In the end I am guessing you would have to file a lawsuit, and there is a Supreme Court case in which Supreme Court Justice Roberts, in a concurring opinion, suggested you may have to file a claim with the plan and exhaust your administrative remedies before you can even file a lawsuit.  If you want to try and recover it will be a lot of work for you.  It will be very difficult, and if you want to hire someone to help, it would probably cost more than the $8,000 in losses.  It is unfortunate that 401(k) plan litigation is this way - and in fact a lot of litigation is this way - but the old adage of don't throw good money after bad money may apply here.  

[jpod]

Maybe you will feel that this is "easy for me to say," but if you do not have an immediate need to convert all of the 401k investments to cash and instead intend to maintain them as long term investments for your retirement, those investments will (most likely) recover and continue to grow over the coming years.  

[Jeanie]

Thank you all for your input.  I will consider each response as carefully as I can.  It's overwhelming to have to deal with this while also dealing with the loss of my husband.  As far as I know, the employer (CBS) and/or Vanguard chose the investments, not my husband.  100% sure that would have been something he would have discussed with me.   

[ratherbereading]

Hi Jeanie. I am so sorry for your loss!  I would suggest asking his employer if he indeed chose the funds, or if they did. With most investment houses like Vanguard/Nationwide/John Hancock, the participant fills out an enrollment form and indicates the funds. Honestly, as close as my husband and I are, we didn't discuss what funds we are choosing for our 401k accounts. Perhaps you can find his original enrollment form among his papers at home? Best of luck!    

[Bob the Swimmer]

hi JEANIE---

I'm sorry for your loss also---this is par for the course with Vanguard and many others---we've been through this twice with V. with deaths this past year-----stay the course as you are and document, document, document everything. I agree with what's been said above, freezing does not mean insulating a DC account from losses---your first move if you want them to do so, is to sell everything (if that is the right investment decision for you). But first check with your estate attorney to see if that's what you want to do at this time.

[Patricia Neal Jensen]

Again, so sorry for your loss.  Not defending Vanguard because they can be slow, as you experienced, but they did know "know" your husband was deceased until they received the death certificate.  I think your complaint is with your husband's employer's HR department.  They should have helped you through this process in my opinion.  Unfortunately, I do not think you will succeed with any claim against anyone with regard to this perceived loss.  You may be able to keep the account active and hope that the stock market goes back up.  It has plummeted during the time period you reference, again, in my opinion, due to President Trump's idea that tariffs would not cause market retaliation.   It (the market) may very well right itself in a week or two.  The best of luck to you.  A trustworthy adviser might be a valuable addition to your team.

[ERISAAPPLE]

Good luck Jeanie.  I lost a loved one this year.  No words can truly capture the grief.  

 

[K2retire]

15 hours ago, Bob the Swimmer said:

I agree with what's been said above, freezing does not mean insulating a DC account from losses---your first move if you want them to do so, is to sell everything (if that is the right investment decision for you). But first check with your estate attorney to see if that's what you want to do at this time.

I can't imagine how overwhelmed you're feeling. Unless you need the funds from this account to meet immediate living expenses, take some time before making any decisions. We often don't make our best decisions in times of great stress. Some experts recommend not making any major decisions for 6 months or so after the death of your spouse. My mother sold many things that she has since regretted due to her grief over my father's death.

[Patricia Neal Jensen]

Good morning, Jeanie.  Thinking about you. The markets are at 2 week highs this morning.  Hopefully, this will be reflected through the close and you will be able to see the result (again, depends on the account's investments) tomorrow morning. (Mutual funds do not report intra-day trading so if the markets continue to do well, the Vanguard funds may show it tomorrow morning.)  As has been suggested by others on this site, don't rush this the decision to exit the market, if possible.  There also will be a lag between the communication of your decision to leave these accounts and the execution of that decision.  Hopefully that would only be one day, but, as noted above, mutual funds only trade on values at the close of business each day.  For example, if you gave notice to sell today, you would receive the values as of the close of the market today and you would see it tomorrow.

I am an attorney not a licensed broker so please note that I am sharing from my own experience and not as an adviser.  Peace to you.

 

[Jeanie]

Thank you all again.  The account was finally put into my name on April 4. The statements begin on that day and there is no history prior to that. (beginning balance shows as zero)  What I want from Vanguard, and has been my issue all along, is to be able to track the statements/daily balances prior to the time the account was put in my name.  With no history to refer back to, how can I make any decisions about the performance of the investments?  It will take weeks to months to build a new history.  I realize now is not a good time to move anything until (hopefully) the market goes back up.  My plan is to move everything from Vanguard at the right time and put the funds into an IRA.  I'm not a risk taker and I just want out.  I don't need the stress.  Fortunately, I don't need the cash at this time.  I am in contact with the DOL and we had decided on a 2-week waiting period to see if Vanguard would provide me with a history of statements.  They have not done so, and I missed the call from the DOL today.  (darn!)  And so it goes...

[Patricia Neal Jensen]

Sounds like you are doing a very good job!  All of these funds are registered with the SEC and the returns are public so you can "Google" something like "comparison of  Vanguard funds" and you will find a bunch of information that may be helpful.  In other words, there is history on these funds and you don't need the statements from this account to see what it is.

[ratherbereading]

If you don't need the cash just take the money and put it into an IRA. 

[card]

"My plan is to move everything from Vanguard at the right time and put the funds into an IRA."

Keep in mind that as a spousal beneficiary you have the option of transferring the money either into an inherited IRA or into your own IRA. In most cases the latter is most appropriate but in some cases, depending on your age and whether you'll need to use the money (for example, before age 59 1/2 when the 10% early distribution penalty might apply) it makes sense to roll it over into an inherited IRA. So be sure to evaluate all your options. Best of luck.