Many people I work with have self directed 401 k accounts. It has now been said that due to a vote from the board of directors, all accounts will now be handled by fidelity and all self directed accounts have ended. Is this possible? Is this legal? I thought 401 k’s could always be self directed. And are they really allowed to make a change the requires me to take money from one account and put it in a corporate directed one?
Any company monetary matches they have given you that are not fully yet vested are theirs to decide what they will allow you to put them into. If you chose to leave the money where it is you will lose the un-vested company match portion.
Anything that is already vested can be left by you where it is.
Any future contributions and company matches can be directed by the company as to what you can invest in.
You would have to start up a seperate IRA (Roth for example)(non 401-K) to control your money yourself.
It’s not clear what you mean by saying it’s now self-directed, but soon Fidelity / management will control.
Do you mean, Fidelity will administer the account, provide you with a management-approved list of funds, and you can choose between those funds? If so, then that’s pretty standard. And I’d be curious to know how your current 401(k) works right now - does each employee have a separate broker (e…g yours is Vanguard, Joe Smith’s is Fidelity etc.)?
If you’re saying the management will decide on specific funds, and how your money is allocated among those funds (e.g. 50% has to go to Fidelity Magellan, and 50% has to go into company stock or whatever), then that sounds quite fishy. Especially if it involves your portion.
It wouldn’t surprise me if they could direct how you invest their matching funds, though I’ve never worked anywhere that did this.
When I stated “the company decides what you can invest in” I meant that they can decide which company (Fidelity) will handle the funds and which list of funds you can choose from.
I will try to look up tomorrow if this is illegal. I don’t think it is. Self directed plans are great, but too many people end up dumping their 401k money into very high risk and speculative investments.
While I don’t particularly like plans in which you’re only give a few mutual funds to decide where to invest the money, some companies have decided that it is better that the money be invested there rather than in a very narrow etf or penny stocks.