401K Distribution after Employment

[Guest salford]

I recently separated from an Employer or the Employer terminated me for undefined reasons. I tried to get my 401K distribution approx. 8 days after my employment was terminated. I was told by the plan administrator that I was listed as on a "Leave of Absence" and they could not give me a disribution until this wa cleared up. 41 days later the plan administrator had the same response. 43 days passed from my first call until the plan administrator/employer changed my status of employment. In this time I lost approx. $50,000 in vested funds. Is my employer liable for this loss in any way?

[pmacduff]

If you don't care about "making waves" for your former employer, contact the Department of Labor. They will usually get the particulars from your side and then from your prior employer and determine if anything was out of line.

[stephen]

What is the distribution policy for your plan?

How often are the assets in the plan valued? Frequently there is a wait time before you can receive your balance depending on how frequently the plan completes an allocation (some plans are annually, semi-annually, quarterly, and daily).

If there are discretionary employer contributions allocated at plan year end that too could cause a delay. As you may have to wait until the year-end allocation has been completed.

Another possibility is that if your vested balance is greater than $5,000 you could wait until your account has recouped some of the $50,000 loss before taking a distribution . As the company cannot force you to take a distribution without your consent.

[Guest salford]

I response to Stephen:

My plan states you may request a full distribution of your account if you: Terminate Employment.

The assets in my plan are valued daily.

I was told that the sole reason I could not get a distribution was because the employer had me listed as on a "Leave of Absence" in lieu of being terminated.

____________________________________________________

In response to pmacduff:

I have taken steps to file an inquiry with the DOL, Pensions and Welfare Benefits Administration.

[pmacduff]

salford - If possible, if you could report back in the future regarding your experience with the DOL/PWBA, it would be appreciated. Working for TPAs, I have answered questions for plan sponsors from the plan side, but never heard from a participant what kind of response and information they get from the DOL/PWBA. Thanks in advance.

[stephen]

Best of luck to you.

I also would like to hear back from you regarding what the DOL's repsonse is.

[jpod]

I am assuming that you had the right to change your investments on a daily basis, and will continue to have that right as long as there is any money in your plan account. While I am by no means making light of your loss, you should expect that the employer's response will be something like the following: "Our plan is a self-directed plan that satisfies the requirements of Section 404© of ERISA, and each participant is solely responsible for his or her investment decisions, including the decision not to make any investment changes. Therefore, the length of time that elapsed from the date you requested a distribution has no bearing on the value of your Plan account."

Nevertheless. good luck.

[Guest salford]

Reply to jpod:

Thank you for your reply. My point was not that I had a loss but that my former employer had me listed as on a "Leave of Absence" when I never was! I never requested or accepted a "Leave of Absence" and it was this employment status that held up my distribution for 43 days.

[jpod]

Sorry if I'm confused, but your initial post asked if the employer would be liable for your loss, and I was trying to give you a heads-up as to what your employer's defense might be.

[Guest salford]

No problem, and I don't think you were confused - I still want to know if my employer is liable for my loss but in relation to incorrectly posting my employment status. I had the ability to change my investments on a daily basis but I did not have the ability to change my employment status.

[jpod]

To clarify, therefore, your employer may say: "We're sorry if you think we mischaracterized your status, but even if we did, that did not contribute to your loss. The loss was entirely due to the performance of your investments, and all investment decisions were made by you."

This would be a substantial defense for the employer, although not a slam-dunk. I have no idea what a court do in your case, if it ever got to court. It would depend upon all the facts, including the terms of your plan.