Fidelity Accidentally Liquidated my 401K

[jazz4cash]

It seems like most of responses are missing the point. If I were in that situation, I would expect Fido to give me benefit of the doubt.....if it was a huge amount maybe they make some other concession but the $5k seems reasonable to fix an error that was 100% caused by them for a new client. I'd make some noise at mega-corp and the fact that they did not immediately take ownership is extremely disapointing.

[Jerry1]

I think you are correct that the cut off is when you have control over your account. However, I think you should be honest with yourself - we're you really going to do a trade? If not, I think Fidelity has handled this fairly. If you were going to trade, you should probably pursue this.

No need to answer, but did you make a trade the minute you had control? If not, that may be your answer on whether to pursue this any further.

[ivinsfan]

Quote:

Originally Posted by cat4ever Software glitch, had to do with mega corp moving management of our 401K from in house to Fidelity.

Why don't you ask your megacorp for the money you want?

[ivinsfan]

Quote:

Originally Posted by cat4ever Rest assured it did, and I can give you the deets... Back when my account was managed by mega corp, I had for a time set it up to make monthly withdrawals from my account for a set amount into my regular bank account. I eventually turned this off. Then In 2022, mega-corp moved all our accounts to Fidelity, and they were apparently moving parts of the databases over to Fidelity in a piecemeal fashion for the first several months of 2022. The old withdrawal command i had setup was still sitting in the old database, and that command got brought over to Fidelity at some point, but without the set amount attached to it, and with out the command that it had been turned off. So, software being software, saw the withdraw command with no amount, and apparently the default for a withdraw command is withdraw it all, and the next morning I got an email that my withdrawal was successful and I went into panic mode.

In this scenario who is they?....

[RobbieB]

Software. The reason I like to do business in person. On paper. Sign the form.

No software for me thanks -

[ERD50]

Wait a minute, are we talking shares, or dollars?

It sounds like they took (as an example) $500K (dollars) from your account. This meant selling (for example) 500 shares of an investment at $1,000/share. Then, some days later, they correct the mistake.

Are you saying they replaced the 500 shares, but they are now worth $485K.?

I can see it both ways - they removed dollars ($500K), they should replace dollars ($500K).

Or, they sold 500 shares, they should replace 500 shares.

At this point, I think you have a case to be made that the transaction was in dollars, the correction should be in dollars.

It's tricky - but they inconvenienced you (to put it mildly, most of us would be screaming to find a large $ amount gone missing!), you did nothing wrong, so unless there is more to the story, I think they should go the extra mile. EDIT - just saw your update, not sure if megacorp or Fidelity is "they".

-ERD50

[CRLLS]

Quote:

Originally Posted by cat4ever Generous? It didn't cost them anything, they merely used the money they pulled back from my bank and the IRS to buy both the initial and the extra shares. "I would have thought they only would have owed was to make the same investment holdings. " So they just keep the extra since the shares cost less to buy back on their initial buy?

Well, that's how you look at it. They made you whole when they replaced your investment positions, no? instead, you are 10K ahead without you making a trade, regardless of whether you could have or not. I get your being upset. I would be too. But I wouldn't expect to make out on the fix. Just my opinion.

[ownyourfuture]

Quote:

Originally Posted by cat4ever These are the three tenets I think are fair, and cover all the scenarios brought up, as to what they should be on the hook for: 1. They must at least use all the money they retrieved to buy shares back into my restored 401K. 2. My account should at least have the same number of shares of each fund that it had on the day it was liquidated. 3. On the first day that I am in control of my shares and can trade again, the value of my account should, in effect, be made to be at least the same as the value it was the day it was liquidated. Remember, this is their error, not mine.

Agree 100%
I'm shocked by how many here are basically telling you to forget about it and get on with your life. As someone else stated "this should never happen"

The Johnson family is worth around $48 billion. Seems like they could give you a little something for your trouble.
Free TurboTax the rest of your life ?

[SecondAttempt]

Quote:

Originally Posted by 11522914 If the market went up that day, would you have notified Fidelity that they should keep those profits since you weren't able to trade? If the answer is yes , then continue to pursue your claim with them. If no, then move on.

+1

Edit to add: OP, your situation is, as someone said, annoying. And I think your position is reasonable but probably not winnable. If you are an active trader with a history of trading on 1% market swings in that account you may have a stronger case. If you are not an active trader then you have demonstrated that you likely would not have acted if you had had access a day earlier. There is also a principle at work here in the sense that you can't make risk decisions after the fact. Fidelity almost certainly has a policy on situations like this that would be upheld by an arbitrator. You just got caught on the bad side of the policy because of market activity.

[pb4uski]

Quote:

Originally Posted by cat4ever ... What say you board?

Unless you actively trade in that account, then I think they have treated you fairly by restoring the number of shares that you had when they made the mistake. If any of those shares paid dividends then you would be due the dividends as well. All of that would make you whole assuming that you would not have traded during that 2 weeks.

At the same time it is unseemly for Fido to profit from its mistake and it sounds like they have in that they received $500k back from the IRS and only paid $490k to replace the shares... they came out $10k ahead as a result of their mistake. I would require that they disgorge themselves of that $10k of profit and add $10k of cash to your account.

The dangling $5k is based on your claim that you would have traded all of your shares on the one day that you couldn't trade them. That is the nature of mutual fund shares vs ETFs. I'm skeptical that you would have traded the shares that day so I would take Fido's side on that part of your claim.

So if I were the arbitrator I would rule that you should receive $10k of cash in addition to the restoration of the shares... they should not profit from their mistake.

Now if it had gone the other way and it cost them $510k to restore the shares then the $10k would be the cost of their mistake... in this case they got lucky and it didn't cost them anything.

[cat4ever]

Quote:

Originally Posted by ivinsfan In this scenario who is they?....

Fidelity, working with input from the mega corp database team I would hope.

[cat4ever]

To me, what it comes down to what day do you use to make the determination on how much it will take to fulfill their promise of "loss protection", i.e. restore my account to at least its previous value per my 3rd tenant posted above. I think that day should be the first day I had the ability trade, akin to having the keys to the car handed over. They decided to use the day before, when they bought the shares, which in actuality was them merely using the extra money they had left over after buying the initial shares one month previous (the second tenant) and not loss protection.

Thanks for everyone's input btw, I really appreciate it. If nothing else it's helped me hone my arguments. And yes, I do have mega-corp personnel involved in this as well as some have suggested.

One final note, if they had reached out before actually buying the shares and asked me how I'd like to have them re-invested after two weeks on the sideline, and during a very tumultuous time with the Russian invasion really ramping up, I'd feel differently. But they never communicated anything to me about specific plans, not even when they planned to make the buy. I just happened to see that it happened one day when checking my account. The only person they let me talk to has been a PR person, and throughout, all I could get out of her was they were still figuring out how to restore my account. My mega-corp representative did get them to admit recently in an email to her that the whole process lacked transparency and they were sorry about that.

[pb4uski]

Did you sell all your shares in the first day that you could to avoid any further losses? Unless you did, your claim for that last $5k rings hollow and sounds to me just greedy.

[cat4ever]

At that point the PR person told me they were still figuring how to make make my account whole. keep in mind at this point (and for the next month) they were still holding onto the extra money from my account. Because of this I was very hesitant to make any trades as that would just muddy the waters and make my calculations as to what I thought they still owed me that much more complex.

But again, to me (and I realize you don't agree and perhaps question my motives, which is fair for an arbitrator role), it comes down to what day to use for the "loss protection" calculation, regardless whether I would have traded or not. The next day just seems the most appropriate date to me.

[MRG]

You misspelled Vanguard....

I worked for a provider to the fund industry. Take what they offered and call it a good day. It's not worth the aggravation. Somewhere buried is a communication saying to disable all automatic anything, you may not have received it but it was there.

[ivinsfan]

Quote:

Originally Posted by cat4ever Fidelity, working with input from the mega corp database team I would hope.

The way you explained it the old inactive withdrawal request was in mega corps data base so I'd be pointing the finger at them...

[copyright1997reloaded]

Me, just here thinking about what happens at the end of the year w.r.t. tax reporting (i.e. further possible issues to come).

[Cerys]

I was just going to say the same thing. Save all the documentation about this, and the emails back-and-forth. Just in case they accidentally report this at the end of the year, that could be a taxable event. Actually that is a taxable event even though it was a mistake. Depending on how it was fixed, it could trigger their software into creating that what is that a W-2? So I would absolutely download all the stuff frankly I’m more comfortable with printing stuff out. Just keep it on hand just in case. Because you literally got that money in your checking account even though they pulled it back.

[cathy63]

Quote:

Originally Posted by Cerys I was just going to say the same thing. Save all the documentation about this, and the emails back-and-forth. Just in case they accidentally report this at the end of the year, that could be a taxable event. Actually that is a taxable event even though it was a mistake. Depending on how it was fixed, it could trigger their software into creating that what is that a W-2? So I would absolutely download all the stuff frankly I’m more comfortable with printing stuff out. Just keep it on hand just in case. Because you literally got that money in your checking account even though they pulled it back.

If there's a tax doc, it's going to be a 1099-R, not a W-2. I think if OP does get a 1099, she would be able to report it as a rollover on her taxes, especially if they took less than 60 days to fix it.

This is where that extra money that Fido kept could cause complications. To report a 401k rollover, you put the amount withdrawn on line 5a and $0 on line 5b then write "rollover" next to it; but you're only supposed to put a $0 on 5b if the amount that went back into the account is the same as the amount that was taken out. Otherwise the excess is taxable income.

Could the IRS ever figure out that less money went back into the 401k? I think that would be pretty difficult, because that info would be buried in the reports the employer sends to the IRS rather than on a tax form produced by Fidelity. If this were an IRA, there'd be a 5498 that should match up to the 1099-R, but I don't think there's any similar doc for 401ks.

If Fidelity ever agrees to give back the excess funds, I suspect they'll pay it as an early withdrawal from the 401k, which is subject to income tax and a 10% penalty if OP is under age 59.5. If that happens, I would say that OP should go after her megacorp and ask for a payment to cover the 10% penalty since they instructed Fidelity to liquidate the account. (That payment would also be taxed, but there's a formula they can use to plus-up the payment so that it covers the tax as well.)

[cat4ever]

Quote:

Originally Posted by ivinsfan The way you explained it the old inactive withdrawal request was in mega corps data base so I'd be pointing the finger at them...

It would depend on the daily goings on of the software engineers on both sides working on it at the time and I don't have enough information to say one way or another. However, Fidelity has indicated to me and to the mega-corp rep full responsibility.