401(k) Plan Sponsors and Participants: Be Aware of Unethical Requests

In our ongoing effort to keep you apprised of important industry developments, we thought you should be aware that Wells Fargo recordkeeping is presently under investigation by the United States Department of Labor (DOL) for alleged actions surrounding its asset retention practices. While it’s not uncommon for recordkeepers to attempt to retain as many assets as possible as they exit their clients’ retirement plans, in some instances they’ve taken the misstep of soliciting rollovers to more expensive proprietary IRAs prior to a participant experiencing a separation from service through in-service withdrawal at age 59½.

You might recall that a few years ago, Principal came under similar focus for allegedly recommending rollovers to its own IRAs that were said to be more expensive than what participants were paid within their former plans. As a reminder, no service provider should be soliciting rollovers, so this instance involving Wells Fargo bears watching. Unfortunately, because this a regulatory investigation rather than a lawsuit, we don’t yet have a complete picture of the facts and circumstances.

That said, Wells Fargo’s actions are under scrutiny but, as mentioned, these practices are not necessarily unique. Recent articles in the mainstream press named Morgan Stanley as allegedly having similar goals for retaining exiting assets, while Bank of America’s Merrill Lynch was accused of implementing something similar until they changed last year in anticipation of the new DOL Fiduciary Rule, which is now likely disappearing.