Fidelity’s decision on rollovers is an sign


I loved the scene in the movie Donnie Brasco where the gang needs to make money for their boss’ take and they’re trying to hammer money out of a parking meter. In similar news, Fidelity has changed its focus on rollovers for the plans they serve as third party administrator.


Fidelity Investments has reversed its long-standing push for 401(k) rollovers by agreeing to advise assets from former participants that stay with their plan sponsor clients. They say it’s because too many ex-employees refuse to fill out forms or deal with their old HR department. It probably has to do with the thinning margins from rollover accounts, especially with the elimination of commissions industry-wide.


Fidelity will only allow investors to keep advised assets in place if they put their assets in the firm’s in-house target-date funds.


While this might make sense for Fidelity, my concern as an ERISA attorney is on the plan sponsor side. While more assets in a 401(k) plan mean better pricing, dealing with the assets of former employees is a headache, especially as to required notices and disclosures. What may be good for Fidelity, may not be good for the plan sponsor.


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