Boss sold practice in 8/15. Termination letter of 401k 4/16

[daniellerdh05]

I'm confused. My boss sold his practice last year but remained as an employee. Before the sell he told us that EVERYTHING will remain the same. NOTHING is changing. Within this we're assuming 401k, hours, employees, pay etc... We were paid biweekly and our contribution to our 401k was automatically deducted and put into our funds (and whatever %he matched). That all stopped after practice was sold. So nothing was takin from our cks and I'm assuming he didn't contribute. When we asked what was going on, he replied the new boss had until October to put in. Another source told me it would also have to be retroactive. Yesterday at 530 pm he (previous employer) handed us a letter saying, " we are providing you notice that, effective April 30, 2016, bla bla bla name of previous practice, the employer will be terminating the bla bla bla 401k plan. Effective with this amendment, no future benefits will accrue after April 30, 2016. Your account balance will not be decreased as a result of this amendment."

Ok with that being said, if he is terminating it as if April 30, what happens to all of that time in between? If he sold the practice in 8/2015, shouldn't that have been terminated then and brought to the attention of the new owner? I brought it to the attention of the new owner and he had no idea about this letter nor our 401k. Is our old employer trying to pull a fast one on us because he has in the past.. He may he forgot this step in closing and is now trying to cover up. Shouldn't he have given this letter to us a long time ago as well? Giving us time to flip our plans. 2 days notice and the new owner had no clue of this. Shady?!?! Who is responsible? Any help is appreciated. Thank you.

[jpod]

Most likely the person(s) who purchased the practice purchased only its assets, not the entity that operated the practice, in which case as a legal matter you went to work for a new employer, in which case you stopped participating in your "old" employer's 401k plan when you went to work for the "new" employer, and the "new" employer didn't take over the 401k plan and evidently is not interested in setting up one of its own, at least not yet. You may not like this, and I can understand not liking it, but there is nothing illegal or strange about it. Under these facts it is to be expected that the "old" employer will terminate its 401(k) plan, so there is nothing alarming about that. You should be receiving information about your options for taking out your money from that plan.

[daniellerdh05]

Most likely the person(s) who purchased the practice purchased only its assets, not the entity that operated the practice, in which case as a legal matter you went to work for a new employer, in which case you stopped participating in your "old" employer's 401k plan when you went to work for the "new" employer, and the "new" employer didn't take over the 401k plan and evidently is not interested in setting up one of its own, at least not yet. You may not like this, and I can understand not liking it, but there is nothing illegal or strange about it. Under these facts it is to be expected that the "old" employer will terminate its 401(k) plan, so there is nothing alarming about that. You should be receiving information about your options for taking out your money from that plan.

It took him almost a year to terminate it. We thought it should have been done then and he should have at least given us information on what to do. He left us with one day to take care of the matter. The good thing, being that I have a big mouth is I brought it right to the attention of the new boss and he said he had no clue of this and he'll take care of it right away. Thank you for your answer

[david rigby]

Agree. Both old ER and new ER did a poor job of communicating, but poor communication is not the same as "trying to pull a fast one".

However, going forward, read all communication materials carefully, and ask questions if you don't understand.

[daniellerdh05]

Agree. Both old ER and new ER did a poor job of communicating, but poor communication is not the same as "trying to pull a fast one".

However, going forward, read all communication materials carefully, and ask questions if you don't understand.

Yes. Very poor. Hopefully it will be taken care of as of today. Our new boss is on it supposedly. Thank you for your answer.

[jpod]

I am not sure you are hurt in any way by the one-day notice, but the facts are a bit fuzzy.

[QDROphile]

"Giving us time to flip our plans. 2 days notice" and "left us with one day to take care of the matter"

Would you care to provide more details to make sense of this?

[daniellerdh05]

I am not sure you are hurt in any way by the one-day notice, but the facts are a bit fuzzy.

Agreed. If he sold the practice in August of 2015, shouldn't he have terminated it then? And then he continued to tell us that the new boss had until October to put in the funds. When I asked the new boss, he said to me that this was never brought to his attention but he'll take care of it. My main issue is the 9 months in between with no funds put in

[daniellerdh05]

"Giving us time to flip our plans. 2 days notice" and "left us with one day to take care of the matter"

Would you care to provide more details to make sense of this?

"Giving us time to flip our plans. 2 days notice" and "left us with one day to take care of the matter"

Would you care to provide more details to make sense of this?

If he had sold the practice in August 2015 shouldn't he have terminated at the sale? He continued to tell us that the new boss had until October to put in funds! The new boss new nothing of this according to him. My main concern is the 9 months in between. He's shady. I turned to a colleague and asked of the whole suituation 2 days prior to this letter. All of a sudden, we get these.

[jpod]

Perhaps promises were broken, but such is life. No indication so far from your posts that your existing 401k money is in danger, or that any money was taken out of your pay and disappeared. Do you like your job?

[daniellerdh05]

Perhaps promises were broken, but such is life. No indication so far from your posts that your existing 401k money is in danger, or that any money was taken out of your pay and disappeared. Do you like your job?

I hear that! I know that no money had disappeared I'm just bummed that nothing was contributed. I try and keep things right for my future. More so for my family. I'm an honest person who tries to do right by everyone. I just have to realize that not everybody is like that. Wish they were. The world would be a better place.

On a different note, I love what I do. Been there for 12 years. I love it more with my new boss... He's definitely on my level. I feel that even him is being screwed by the old boss.. Horrible to say. But......

[Belgarath]

I understand your concern, but first, take a step back and take a deep breath, and don't panic yet. There may not be anything whatsoever inappropriate or "shady" going on, but I know it is difficult for you to determine that when you are getting incomplete information and/or poor communication.

We are all operating on fragmentary information here at best.

1. Assuming this was an asset sale, there is no requirement for the plan to be terminated when the assets were sold back in August.

2. Did you have any deferrals that were withheld prior to the sale that have not been deposited? If so, then yes, this is a violation (perhaps not intentional) and the former employer entity will be required to deposit them and pay interest. If there is any employer required contribution (safe harbor, match, etc.) that is due for the period prior to when you became employed by a new employer, then that amount will need to be contributed prior to the plan termination being completed.

3. Address your questions, IN WRITING, to the Plan Administrator (presumably your former employer.) See what you get. The fact that you are getting any communication at all tends to make me think there is nothing deliberately shady going on, but really no way to know that from this end.

Hopefully you'll get appropriate answers and all will be cleared up to your satisfaction.

[daniellerdh05]

I understand your concern, but first, take a step back and take a deep breath, and don't panic yet. There may not be anything whatsoever inappropriate or "shady" going on, but I know it is difficult for you to determine that when you are getting incomplete information and/or poor communication.

We are all operating on fragmentary information here at best.

1. Assuming this was an asset sale, there is no requirement for the plan to be terminated when the assets were sold back in August.

2. Did you have any deferrals that were withheld prior to the sale that have not been deposited? If so, then yes, this is a violation (perhaps not intentional) and the former employer entity will be required to deposit them and pay interest. If there is any employer required contribution (safe harbor, match, etc.) that is due for the period prior to when you became employed by a new employer, then that amount will need to be contributed prior to the plan termination being completed.

3. Address your questions, IN WRITING, to the Plan Administrator (presumably your former employer.) See what you get. The fact that you are getting any communication at all tends to make me think there is nothing deliberately shady going on, but really no way to know that from this end.

Hopefully you'll get appropriate answers and all will be cleared up to your satisfaction.

I will definitely check into all of this... Thank you!

[Belgarath]

You are welcome. P.S. - please note in #2, I mentioned if there is any "required" employer contribution. This is really the operative phrase - it is very possible that the plan provides for an employer DISCRETIONARY match, or profit sharing contribution, which under the terms of the plan would not be required. So if all deferrals were properly deposited, it is quite possible that no further contributions are required under the terms of the plan.

Again, speaking in generalities here, as we don't have full information! Good luck.

[Lou S.]

It is quite possible the prior employer kept the plan open until he determined if any final contributions were need for tax deduction reasons.

As others have said, if no money was with held from your pay check then likely the only thing both employers are guilty of is poor communication.

If this was an asset sale, and that seems likely in this case, the new employer would not even have authority to withhold 401(k) contributions without establishing a new plan and getting new deferral elections.

As for the 2 days notice that is problematic as by law I believe they must give you 30 days before requiring a distribution.

[daniellerdh05]

It is quite possible the prior employer kept the plan open until he determined if any final contributions were need for tax deduction reasons.

As others have said, if no money was with held from your pay check then likely the only thing both employers are guilty of is poor communication.

If this was an asset sale, and that seems likely in this case, the new employer would not even have authority to withhold 401(k) contributions without establishing a new plan and getting new deferral elections.

As for the 2 days notice that is problematic as by law I believe they must give you 30 days before requiring a distribution.

Thank you for your answer!

[ESOP Guy]

As for the 2 days notice that is problematic as by law I believe they must give you 30 days before requiring a distribution.

Is he really only giving you 2 days to take a distribution? That isn't clear from the facts given so far.

[masteff]

I think the "two days" is because in post #1 the letter said plan was terminating as of 4/30 and they got the letter yesterday which was 4/28.

This however does not mean that participants' accounts will cease to exist at 11:59pm Saturday. See the 3rd bullet on this IRS webpage: https://www.irs.gov/Retirement-Plans/Plan-Sponsor/401(k)-Plan-Termination

You will want to figure out where you want to do a rollover of your account to. If your new employer is not providing a retirement plan, you will likely want to look at opening an IRA to receive your rollover from your 401(k). I encourage you to research rollovers and IRAs so you can make an informed decision.

[Lou S.]

As for the 2 days notice that is problematic as by law I believe they must give you 30 days before requiring a distribution.

Is he really only giving you 2 days to take a distribution? That isn't clear from the facts given so far.

That's true, my assumption may be off. They may be hurriedly trying to close a plan before crossing a PYE to avoid and additional 5500 filing, I don't know. Or it could just be the dates on the notice as masteff suggests.