Editor's Note: This article is part of the Financial Advisor series "How I Solved It." Advisors describe a problem client and what they did to help.
An article Financial Advisor recently published about an advisor who helped a middle-aged engineer consolidate his dozen 401(k) plans struck a chord with another advisor who also helped a prospect overwhelmed by a plethora of old retirement plans.
This prospect was in his mid 50s and had six 401(k) plans when he reached out to Brandon Konda, founder and president of The Freyr Group, an independent wealth management firm in Irvine, Calif. At the time, Konda was managing the 401(k) plan for the company the prospect had just started working for.
When the prospect dumped his files on Konda’s desk, they rediscovered a couple of old 401(k) plans he had forgotten about that had balances ranging from $10,000 to $20,000. According to Konda, the prospect’s largest 401(k) account balance was about $100,000. The half-dozen plans were spread across different custodians.
“As you can imagine the paperwork to get all these moved over was hefty and time-consuming,” he said. “The twist in this story is that one of his former employers had recently gone into receivership.” The judge in the case had issued a freeze of all company assets, including existing 401(k) balances.
It had been 10 years since the prospect (who became a client) had worked for that company, which was hundreds of miles away from where he was now living in Southern California. Konda learned about the freeze on the client’s account when he contacted the custodian. The custodian provided Konda with the name of a law firm that was involved. The law firm then directed him to the senior investigator at the Department of Labor who was handling the case.
Konda had numerous phone calls with the investigators working the case as he tried to get his client’s plan assets released.
“They were sympathetic and wished they could help,” he said, “but ultimately no one could do anything until the case worked its way through the court system.” It took a full year, with Konda following up on a monthly basis with the investigators, before his client’s account balance was unfrozen and the funds could be rolled over into an IRA. This was the longest it ever took him to help complete a rollover.
Fortunately, his client didn’t immediately need the funds in his 401(k) plan, but other plan participants might be in a less comfortable financial position.
Konda said he always brings up this client’s situation when discussing the options for old 401(k) plans with clients and prospects. “This experience has reinforced to me the importance of maintaining control over one’s retirement funds and how doing so is usually the best course of action for a client,” he said.