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Conference nyoss1::market_investing

Title:Market Investing
Moderator:2155::michaud
Created:Thu Jan 23 1992
Last Modified:Thu Jun 05 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1060
Total number of notes:10477

1056.0. "401K and Pension funds upon one's departure???" by WMOIS::UGUR () Fri Feb 21 1997 14:45

    Hi,

    I have a question in regards to withdrawing the pension and the 401K funds
    when one leaves a company.  I am familiar with Digital's and Benefits 
    Express's policy on this.  What happened was that my wife quit her job
    back in September 1, 1996 (She did not work for Digital).  Her pension and 
    the 401K funds were rolled over to Vanguard IRAs effectively on January 
    23, 1997.  Her old company claimed that her account was "frozen" as of
    her last day of work.  Now, I understand the company not making any 
    contributions since that day on, but they claimed that her established 
    funds became inactive as of her last day.   This was the case for about
    almost 4 months during which stock market gained about 15% or so. They
    told my wife on the phone "this is the way it is done here" or something 
    like that.  This being a small (45 people) and relatively young company,
    I have a feeling we are being cheated, or they do not have their policies
    on this matter ironed out yet.
    
    Now, this would not be the case for Digital employees.  Until the day 
    the funds are withdrawn, they continue to be active (i.e. gains and 
    losses stay in effect).    

    My question is... 

    Do states (she worked in MA) or Federal Government regulate the Companies'
    policies on pension and 401K funds specifically when one leaves the company,
    or the companies adopt their own.  If you do not like it, tough.  How are 
    one's legal rights protected in this case.  Before I make official 
    contacts with the company, I want to understand more about the laws and
    regulations on this. 
    
    I have read similar entries on this subject, but did not see an answer to	
    this question.  Any pointers, suggestions will be appreciated.

    irfan.

    
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1056.1PADC::KOLLINGKarenFri Feb 21 1997 16:469
    Re: .0
    
    I had the same number done on me by Adobe.  I finally wrote
    to the Treasury Department (or some place similar, I forget)
    and got told, tough luck, there is nothing in the law that
    requires prompt action.  In my case, I was going to transfer
    it into CDs, and the interest rate dropped substantially while
    Adobe was sitting on the money.
    
1056.2Nothing on the Federal level yetNCMAIL::YANUSCFri Feb 21 1997 17:089
    RE: .0
    
    This is another one of the areas that the Feds are looking into for
    some sort of protection for small investors.  At this point in time,       
    though, there is nothing on a regulatory level that will protect your
    wife (and specifically your lost income during the recent stock market
    upswings.)
    
    Chuck
1056.3PCBUOA::BAYJJim, PortablesFri Feb 21 1997 20:1312
    So, let me understand this.  If you leave Digital, and don't roll your
    401K over, it will just sit there and "collect interest", as it were.
    
    But at other companies, its possible that when you leave, the account
    "freezes"?  What does that mean?  Your funds are invested in
    something, like a fixed interest fund, or a mutual fund.  A fixed
    interest fund continues to collect interest.  A mutual fund changes
    value with market fluctuations.  Does this mean that your monies are
    pulled out of the funds and essentially devalue over time?
    
    jeb
    
1056.4DECCXL::OUELLETTEFri Feb 21 1997 21:423
It can be worse than having the money put into an escrow account.
The money can earn zero interst while frozen...  as I understand it.
One more thing to write your senator & representative about changing.
1056.5RE: .3WMOIS::UGURMon Feb 24 1997 13:3715
    >> So, let me understand this.  If you leave Digital, and don't roll your
    >> 401K over, it will just sit there and "collect interest", as it were.
    
    Yes, the same plan you have chosen while you were working would be in
    effect, remember, this does not always warrant positive return.
    
    
    What I meant by "freezing" was that the money invested in different
    funds while she was working did not return any gain or loss between her
    last day of work and the the day the account was rolled over to an IRA 
    account, equivalent of being kept in a safe box.
    
    
    
    
1056.6PCBUOA::BAYJJim, PortablesMon Feb 24 1997 16:4710
    Digital's benefits may not be as generous as they once were, but boy,
    it sure sounds like there's some real crud in the "outside world" by
    comparison.
    
    Imagine if you didn't know about such a policy, and thought you could
    leave your 401K untouched until retirement?!?!?  Do they still send
    statements?  I guess you'd eventually catch on, but brrrrrrrr!
    
    jeb
    
1056.7DECCXX::WIBECANThat's the way it is, in Engineering!Mon Feb 24 1997 17:2915
>>    Imagine if you didn't know about such a policy, and thought you could
>>    leave your 401K untouched until retirement?!?!?

I think you misunderstand.  Nobody said anything about whether you could keep
the money in the other company's 401K plan until retirement.  The question was
about promptness in complying when you wanted to roll the money over into
another account.

Either the company will allow you to keep the 401K money in the investments
it's currently in, or you can roll it over elsewhere.  If you want to do the
latter, there appear to be some significant delays between taking the money out
of the investments and putting into the "elsewhere," but I would hope these
delays don't amount to years.

						Brian
1056.8PCBUOA::BAYJJim, PortablesTue Feb 25 1997 14:4616
    Yeah, but what if you start a new job, and don't feel comfortable
    rolling over your present 401K into the new company's 401K?
    
    Well, bad example.  I guess ANYTHING would be better if your 401K is in
    stasis.  How about if your new company doesn't offer a 401K?  Or my
    wife's situation, where she wasn't elgible to participate in the new
    401K for six months.
    
    I guess there are always alternatives, but it sounds like you have to
    be very careful.  Of all the investment vehicles out there, I never
    thought of a 401K as having that much risk associated with it.  
    
    Silly me.
    
    jeb
    
1056.9DECCXL::WIBECANThat's the way it is, in Engineering!Tue Feb 25 1997 16:4116
>>    Yeah, but what if you start a new job, and don't feel comfortable
>>    rolling over your present 401K into the new company's 401K?

>>    How about if your new company doesn't offer a 401K?

>>    Or my wife's situation, where she wasn't elgible to participate in the
>>    new 401K for six months.

In all these cases, then you:
 a) leave it invested in the old company's 401K, or
 b) roll it over into an IRA.

Again, nobody said you couldn't do (a), they only said there was a several
month delay in doing (b) or a rollover into another 401K.

						Brian
1056.10reminders2155::michaudJeff Michaud - ObjectBrokerTue Feb 25 1997 18:438
>  b) roll it over into an IRA.

	make sure you roll it over into a distinct rollover (or sometimes
	called "transfer" or "conduit") IRA.

	Also make sure the money is transfered from your 401k, pension,
	etc directly to the IRA, do *not* have the check made out in
	your name.
1056.11MKOTS3::BREENSans DouteThu Feb 27 1997 21:513
    One starts to think about maxing a loan just prior to leaving in this
    situation.  Then when they are ready to transfer you swap checks.  I
    can just imagine the weeping and whining this would entail.