Reader 1: I started my last job in December 2012 and immediately began contributing to the company’s Simple IRA plan. When I left in May 2014 and started the process to move my account to my new employer’s program, I was told my plan had to have been in place for at least two years and that my account would be out from under that time constraint in June 2015. But because I started contributing in December 2012, my required plan period should have ended in December 2014.
It appears that although my pay stubs and W-2s show my contributions began in December 2012, the company was doing something called a “float.” It did not set up my account until April 2013, and then did not fund it until June 2013 (hence the June 2015 release date). Either its accounting was sloppy, or it was using my contributions for other purposes and then making up for it when it had the funds. This practice is a violation of the Employee Retirement Income Security Act (ERISA) and also has tax implications for me. What do I do?
Reader 2: Last summer, we were told our company was changing to a new company in what sounded like a common merger/buyout. Our original 401(k) would be closed, and a new 401(k) would be offered with the new company. When the switch was made, our vested money in the original 401(k) was forfeit. Most of us were less than two months away from being 100 percent vested.
The “new” company is actually the same company under a new name. It seems like the original company wanted to take back the vested money. Is this illegal since the company is new in name only?
Karla: Assuming these stories are complete, benefits attorney Joel Wood of Crowell & Moring says both situations “could pose some problems for the employer,” which to me sounds like saying lighting up next to a gas pump “could cause a sudden shift in personal altitude.”
Reader 1, Wood says the Labor Department requires employers to remit employee contributions to a retirement plan “as soon as reasonably possible” — as in days, not months. Even if your employer had “legitimate administrative reasons” for the delay — say, your HR team was abducted and brain-wiped by extraterrestrials — that float won’t fly with the Department of Labor.
Reader 2, whatever corporate shell game your employer is playing, it can’t just call backsies on its contributions, according to Wood. Before an employer terminates its 401(k) plan, all employees become 100 percent vested, no matter how much time they had left on the vesting clock.
Wood says workers with concerns about employer-sponsored retirement plans can contact their local branch of the Labor Department’s Employee Benefits Security Administration (www.dol.gov/ebsa or 866-444-3272). Whether these were honest mistakes or fraud, EBSA doesn’t go easy on employers that poach their workers’ nest eggs.
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