Inaccessible vested 401(k) assets

[Guest jkopp]

Is it legal for a company that is in serious financial trouble to "freeze" 401(k) plan assets of former employees who would normally be eligible to rollover the assets into an individual IRA? I have been told that I cannot touch the money, even though it is 100% vested.

[KIP KRAUS]

I don’t see the relevancy of the company being in financial difficulty and them allowing former employees to get their vested account balance. They clearly cannot use 401(k) monies to get them out of financial trouble. Contact the Department of Labor.

[Kirk Maldonado]

What does the plan say about the timing of distributions?

The plan is not obligated to pay the benefits until you reach normal retirement age, which is generally age 65.

In other words, are you sure that this "freeze" is just happening now, and it wasn't something that has been in place all along?

On the other hand, if the employer had a history of always paying out the benefits promptly, and the "freeze" coincided with the employer's financial difficulty, that is a very bad sign. If that is the case, you should consider contacting the DOL.

[david rigby]

Good suggestion. A better first step would be to read the SPD. This will identify the trustee. It might be useful to remind the employer that there is no authority to "freeze" any plan assets. This is exactly the reason that federal law requires the plan to have its own fund, separate from the books, and the fingers, of the company. The SPD very likely will have some generic information that describes this.

Another point not clear in the original post: it is not clear if the participant is entitled to a distribution. Most plans do not permit a distribution to a participant while still employed. Vesting status has nothing to do with this.