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Old 01-02-2018, 06:39 AM
 
Location: Silicon Valley
2,808 posts, read 1,236,603 times
Reputation: 5161

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Quote:
Originally Posted by mathjak107 View Post
we never had any option to pay the fees . it was a single company account and it was shut down on us .

the dilemma was that we knew the company was having credit issues but no one ever thought they would fold. i was there 25 years and they were in business 70 years . as long as we were employed there was no in service withdrawals allowed .

so once the plan was terminated , that was it the money was trapped .

not only that but our profit sharing money was trapped for a year . it required all spousal consent forms be signed by spouses that they were aware the money was being distributed .

it required notices in papers to track down ex employees and all kinds of investigative work before a penny could leave .

so here we are still working for a company and none of us saw the end coming . what chance does someone have when they leave their money in a former plan and don't work for the company .

i cringe when i see people say they left their money with a former employer .

there is nothing better than getting your money under your control when you can . you usually have not only better choices to invest but lower cost too .

i rather risk my own personal bankruptcy than the companies
Ok, so this is starting to make more sense.

In terms of paying the fees yourselves, you wouldn't have that option for a 401K. It is decided by the plan administrator, and decided for all.

Stepping a bit further back, a 401K plan is housed in a separate trust that is initially setup by a company, but is forever separate from it. Like taxes that are part of your payroll withholding, companies are given a very short window (for a large employer it is one day) in which to pass said withholding on too the 401K trust, which is separately administered. This is done specifically to avoid problems should a company ever fail. The is enforced because each plan needs to be audited annually. The administrator will have a program for quickly distributing plan assets when their sponsor goes bankrupt. They will do this, because they're no longer going to get paid, but have certain duties they must perform as an administrator or risk losing that very valuable privilege of being able to administer these plans.

This is separate from a profit sharing plan. A profit sharing plan could effectively distribute into an employee's 401K plan, but its governance stems from the approved plan document.

So a 401K plan, has to be a 401K plan and is setup in a manner that makes non-compliance somewhat difficult. It would be like an employer that doesn't pay on taxes withheld to the government. Nobody does this as there's 100% guaranty of being caught, and while there's no personal liability in working for a company that fails, there is in swiping that money to try and finance an operation.

A profit sharing plan can be anything, but it needs to fit the ERISA governed criteria in order to be considered a tax deductible (and not trigger income for employees). If the plan obligations haven't been met and the Plan fails, it will generally be insured by the Pension Benefit Guaranty Corporation, which is run by the Department of Labor and funded via insurance paid into it by pension funds. The Feds will step in and take care of it, but that one could take time.

Normally this isn't going to be a concern. As a Controller, there's a bright red shiny line of things you will never do. If my company goes bankrupt, so be it. You hear businesses talk about being able to make the payroll, and this is part of it. There's real concern there, because if your company ceases operation, that's fine. If you don't make the payroll (and this is part of it), your life just turned into isht as you can be held personally liable and of course the Feds are going to investigate before they open up their own coffers to make workers whole.

In your situation, I'm guessing someone had a really really bad day when the Feds showed up. You just can't cut it that close. If you haven't pulled up before making payroll is questionable, you're done. Game Over....continue on with extreme risk to yourself.
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Old 01-02-2018, 07:26 AM
 
1,970 posts, read 3,323,942 times
Reputation: 3434
Quote:
Originally Posted by henriInCary View Post
I will be switching jobs in January. I currently have a 401k, that I plan to move to an IRA of my choice shortly after (January as well).
Does your new job also have a 401(k) plan? A plan with a good quality Management Company and a suitable variety of investment options?

If the answer to both is "Yes", then I recommend considering transferring the money from the old plan into your new employer's plan rather than transferring into an IRA. There is a slight age advantage for future access to tax deferred investments with 401(k) Plans using age 55 and IRA Plans using age 59-1/2 for such penalty free access.

Although the 72(t) Rule allows penalty free access at any age - with less freedom of withdrawal amounts and timing.
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Old 01-02-2018, 08:24 AM
 
64,962 posts, read 66,454,984 times
Reputation: 43347
Quote:
Originally Posted by artillery77 View Post
Ok, so this is starting to make more sense.

In terms of paying the fees yourselves, you wouldn't have that option for a 401K. It is decided by the plan administrator, and decided for all.

Stepping a bit further back, a 401K plan is housed in a separate trust that is initially setup by a company, but is forever separate from it. Like taxes that are part of your payroll withholding, companies are given a very short window (for a large employer it is one day) in which to pass said withholding on too the 401K trust, which is separately administered. This is done specifically to avoid problems should a company ever fail. The is enforced because each plan needs to be audited annually. The administrator will have a program for quickly distributing plan assets when their sponsor goes bankrupt. They will do this, because they're no longer going to get paid, but have certain duties they must perform as an administrator or risk losing that very valuable privilege of being able to administer these plans.

This is separate from a profit sharing plan. A profit sharing plan could effectively distribute into an employee's 401K plan, but its governance stems from the approved plan document.

So a 401K plan, has to be a 401K plan and is setup in a manner that makes non-compliance somewhat difficult. It would be like an employer that doesn't pay on taxes withheld to the government. Nobody does this as there's 100% guaranty of being caught, and while there's no personal liability in working for a company that fails, there is in swiping that money to try and finance an operation.

A profit sharing plan can be anything, but it needs to fit the ERISA governed criteria in order to be considered a tax deductible (and not trigger income for employees). If the plan obligations haven't been met and the Plan fails, it will generally be insured by the Pension Benefit Guaranty Corporation, which is run by the Department of Labor and funded via insurance paid into it by pension funds. The Feds will step in and take care of it, but that one could take time.

Normally this isn't going to be a concern. As a Controller, there's a bright red shiny line of things you will never do. If my company goes bankrupt, so be it. You hear businesses talk about being able to make the payroll, and this is part of it. There's real concern there, because if your company ceases operation, that's fine. If you don't make the payroll (and this is part of it), your life just turned into isht as you can be held personally liable and of course the Feds are going to investigate before they open up their own coffers to make workers whole.

In your situation, I'm guessing someone had a really really bad day when the Feds showed up. You just can't cut it that close. If you haven't pulled up before making payroll is questionable, you're done. Game Over....continue on with extreme risk to yourself.

the company very quietly just got put on credit hold more and more with the vendors . it was nothing new since we were a wholesaler and contractors are always slow . so you are always behind the curve .


it looked like the company was going to get financing and be on it's way again . but when some of the financing fell through the company very quietly started to unwind .

they were smart , they told the vendors if they do not force the company in to bankruptcy they may see some money , but if they force a bankruptcy they will surely see nothing .

so basically the company disbanded itself and the 401k plan had fees stop being paid . at that point the custodian liquidates all the accounts and gives it to the court to handle .
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