Employee 401k Funds Ques. - Company "Going Under"

[Guest nroth]

I've had an employee ask me a question concerning what would happen to their funds if the company were to "go under." I'm not entirely sure as the reasoning behind the question and am fairly new with 401k but without looking at the plan documents yet, which I will do, I thought I'd shoot you the question too. It is my understanding that the employee's funds are guaranteed but the employer's match is where I'm not certain. If the employee is already 100% vested in the funds, would there be any reason, some type of law that states they would not be entitled to those funds?

They mentioned the possibility of transferring out the funds from their current account, stopping all deductions and restarting their deductions in October. I don't believe this is possible but since I'm not an expert...I'm thinking other than a loan, hardship withdrawal or a termination, an employee can't just withdraw/transfer the funds as they want.

Any help is appreciated!!

[Guest consultant]

Participant assets are safe as they are held in trust with a non-interested party (or should be). Unless the plan document specifically states that a employer contribution is required (mandatory), contributions to the plan are discretionary (not mandatory). This would not be the case for money purchase, db new comps etc. Check the plan document as to how it addresses matching contributions. Specifically check to see if it states a matching formula 50% of the first 6% etc. Hope this helps.

[david rigby]

Also might be a ggod idea to read the Summary Plan Description (SPD). Should be some generic language in that similar to comments from Consultant above.

[Guest nroth]

The SPD states that the plan can be terminated (stopped). If the plan is terminated, the employee's account will be 100% vested and nonforfeitable. OR that the plan can be changed at any time and the benefits the employee earned as of the date the plan is changed may not be reduced except as required by law.

That's about all I can find in the SPD that references anything remotely close.:confused:

[Guest consultant]

Review the document if you can which will provide the information you are looking for. The SPD will not address a matching formula normally in a dc plan. The statement "the plan can be changed at any time " is standard wording which we use in our spd's. This statement appears to be discretionary because the "can be changed any time" wording. Any time is a discretionary statement.