New 401k plan, funds not being deposited into account

[Guest ironhead1230]

I am just wondering if my situtation is normal or even legal.

My company just moved from a profit sharing plan to a new 401K plan. They have taken money out of the last two checks (I am paid every other week) for the 401K but have not deposited any money into the 401k account. The first check to have funds taken out for the 401K was on July 30th. After I received the stub for that check I tried creating an online account to view my new account. I was not able to. When I inquired with our HR department I was told they were still finalizing the enrollment forms with the 401K company but they would look into it. I thought it was strange that the employees were not even enrolled yet but money was taken out of our checks. Later that week I was able to create an online login and view my account but there was a zero balance. I thought it may take some time for the money to be deposited so I waited until after the next check was issued, August 13th, to check the balance. When I found it was zero I again contacted our HR department. They said the person who was in charge of transferring the funds was on leave and her replacement did not have the authority to do the transfers. A higher up was getting involved and it should be taken care of by the end of the week. That was August 15th, and I still have a zero balance in the account. I have talked to a couple other employees and they also have a zero balance.

Is there a maximum time frame from when a company takes money out of your pay check until it gets deposited into your 401K account? It bothers me because the money that has been taken out so far is in limbo and I have no access to it. For all I know the company is making interest off all of the so called 401K contributions from all of the employees.

-Mike

[wsp]

Is there a maximum time frame from when a company takes money out of your pay check until it gets deposited into your 401K account? It bothers me because the money that has been taken out so far is in limbo and I have no access to it. For all I know the company is making interest off all of the so called 401K contributions from all of the employees.

-Mike

Mike,

I can understand your worry. You're taking the right steps in monitoring your account and I would continue to do so but it's all very likely going to work itself out over the next 2 weeks.

But, in answer to your question, there is a time frame that the money has to be segregated from the corporate accounts into the account of the plan. That doesn't mean that it has to be in an account that is accessible by you or even in an account in your name. Essentially, all that plan account has to be is a checking account that has been set up with the plan's tax id number and the plan name. This is done to segregate the assets of the plan (which can't be attached by crediters of the company) from the assets of the company. That separation is a good thing for you. Hopefully that's exactly what has happened in your case. The money is sitting in a checking account somewhere waiting for the right person to be able to make the transfer. That money may or may not be actually earning income. But, if it is, it should be allocated to your account as well. Legally it's not supposed to go back to the company. But they can use it to offset any fees that would have otherwise been charged to your account. The fact that it's not being invested where you directed it to is a different issue entirely and is a facts and circumstances issue rather than a specific deadline issue.

While I wouldn't say that your situation is normal. It does happen. Typically when the owner of a company decides at the very last minute to make the change to a 401(k) and wants it done yesterday. It takes time to set these up and it sounds like your company didn't take into consideration that people take leaves, get sick, take vacations and such so only one person was authorized on that checking account.