AboutAllen Expertise Pension questions ONLY. Pension, profit sharing, and 401(k) plan design, installation, administration and actuarial services; rollovers to Individual Retirement Accounts; taxation of retirement plan distributions
Experience Over 35years experience in the pension field
Organizations Various actuarial organizations
Education/Credentials MBA and various professional certifications
Question I am a participant in a Profit Sharing Plan & Trust with a privately held co. The company has decided to move the funds from one investment firm to another. We have had no choice in this matter. We have also been told that we have no choice in how the funds are invested during a so called "black out" period. We are told the funds will be held in a "cash" position until all the paperwork can be processed. Up to 4 to 6 weeks. I would have preferred to have my funds "in the market", but was not given the choice. Could/should the new investment company have provided the participants with the option of having the proceeds invested in a fund that would have mirrored the actual investment desires of the participants instead of forcing the participants to take a "cash" position for what is an unknown period of time.
Answer Unfortunately, everything that was done meets the requirements of the law.
However, there are a few things to add:
1. The trustees can change the investment provider. They do have the obligation to do this in a prudent manner and verify that the new providerr will provide you with a good choice of funds and that investment charges will be reasonable.
2. If there is a period of more than 3 days when you will not be able to make changes in your investments, this period is known as a blackout period. You must be given notice 30 days or more before the blackout period.
3. The trustee can choose to convert all the funds to cash or to do what's called mapping whereby the funds are automatically switched to similar funds with the new provider. This is a decision made by the trustee. If the trustee chooses to move all money to cash, the participants are given new election forms with the new investment provider. This means that you are out of the market (for good or bad) during the blackout period.
4. 4 to 6 weeks seems to be a very long period to be out of the market and I would ask why this period is so long. Conceivably, if the market goes up by a substantial amount during this long period, the trustee may have to explain why the period was so long.
