Distribution due to termination

[Guest Rick R]

I was terminated by my employer in 6/99. I finally had to contact him in 10/99 to get paperwork. His plan year end is 9/30. He is giving me the 9/30/98 value plus my contributions? I am 100% vested in the plan. Shouldn't I be entitled to any earnings, divs, gaines/losses on my money from 9/30/98 until it is distributed? He has sent me a check for the rollover which I'm not sure I should accept, I have not signed that I have received final payment yet? What rights do I have? I have asked specifically in writing for a statement showing the current value and the latest is the check in the mail? I don't know what to do?

[bzorc]

How often do you receive a statement of your account? If it is once a year, the employer may have been valuing the plan only once a year. In that instance, paying you your 9/30/98 balance plus contributions, unfortunately, would be appropriate. Do you have a Summary Plan Description? If not, try requesting one from your former employer. It may tell you how often the plan is valued.

If this plan has been in existence for a while, it is quite possible it is valued only once a year. In that case, you are getting a correct value. This is a major drawback of plans, but, within the employer's right to run it that way.

Hope this helps.

[Wessex]

When was your check issued? If the distribution was made more than a day or two (basically, reasonable check processing time) after 9/30/99, you should have received the 9/30/99 value of your account, not the 9/30/98 value. It is possible that the 9/30/99 valuation has not been finalized yet. I know it's ridiculous with today's technology, but such long delays often happen with plans that are valued only annually. Nonetheless, once a valuation date has passed, undistributed accounts must be valued as of that valuation date until the next valuation date occurs. If the distribution check was not based on the correct valuation date, you may be entitled to an additional amount from the plan.

Under ERISA, you are entitled to receive a statement once a year upon request. This right is in addition to any statement an employer might voluntarily provide.

If you are unable to resolve the situation satisfactorily with your prior employer, you may wish to consider writing to the DOL and IRS and letting your prior employer know that you plan to do so.

Finally, you indicate that the check is for a rollover. Whether or not the amount of the check is correct, you have received a distribution from the plan. As you probably know, if the check is payable to you, you can only make a rollover within 60 days of your receipt of the check. I believe that the language of the Internal Revenue Code requires that this 60-day period also applies if the check is payable as a direct rollover to the trustee or custodian of an IRA or qualified plan, although others do not. Does anyone else have any comments on this issue -- or even better, know of any official clarification.

[Guest Rick R]

Thank you for your responses. The SPD indicates an annual valuation at 9/30 each year. The recent check issed was dated 12/8 99. Until 2/99 I received monthly statements of my account, after that the employer moved everything into an Omnibus acct so all shares were transferred out. This all happened without my knowledge until I received fund house statements and could see the transfers out, called the fund house and was told everything was moved to the omnibus acct. When I and other employees questioned the employer(who is the plan administrator)he told us not to worry it was in the basically the same accts. After my leaving I have tried to find out exactly where the funds are and the value on several occasions. He has a third party administator to do his recordkeeping and told me to call them? Now they know nothing and he knows nothing. I do beleive based on some comments that he has changed my allocation percentages and completely changed one of the investments. I am unclear how he can do all of this without notifying me. And is it normal to get the 9/30/98 balance only plus contributions at 12/99? Would I be receiving an additional check for all the earning/gains/losses, divs? When I pose this question to the owner (Plan administrator) he claims we have to contact his TPA they handle everything, but they don't return calls? I am afraid to reinvest the money he has sent although I do realize I must do so within the 60 days. Am I unrealistic in my request?

[Cathy from Chicago]

In my opinion, you are not being unreasonable at all in insisting you receive answers. The employer can refer all he wants to the TPA being in control of the situation, but the bottom line is that he is responsible. The TPA is merely a contract administrator; he is the plan administrator. As a minimum, you are entitled to the 9/30/99 values. Typically, in today's investment world with daily valuations, etc., once your actual distribution was made, you'd be receiving current values versus those of 9/30 based on your actual participant account. Keep bugging your employer - tell him you're contacting the DOL - that'll get him to respond, trust me. A DOL audit can be worse than an IRS audit and no one wants to subject themself to one esp. if it could be resolved by the employer insisting with the TPA that they answer your questions promptly and to your satisfaction.

[Guest KRKost]

There are many small employer plans out there that provide not only for annual valuations but also for a tail-end allocation of earnings. In other words, if you separate from service on 12/12/99 and the plan year ends on 12/31/99, you would not be entitled to an allocation of earnings for the 1999 plan year. While you seem to have an individually directed account, your plan may provide that you lose that right after separating from service and that your account balance will be deposited into the general investment pool - which may have a tail end allocation.

The SPD is a great start but too often, they don't go into sufficient detail. I would get a copy of the plan document and read the allocations section carefully.