Re: Way OT: investments in 401K

Posted by dhermesc on August 02, 2004 at 07:51:13 from (68.110.220.22):

In Reply to: Re: Way OT: investments in 401K posted by Mysterion on August 02, 2004 at 07:06:12:

You are mistaken - companies have no access to 401(k) monies. The funds are held by an investment firms (like AG Edwards and such), its even against the law for companies to wait more then 15 days from one month to the next to deposit your withholdings. They have about as much access to your 401(k) account as they do to your personal checking account.

Where you might get in trouble is if a struggling firm using your withholdings to pay the light bill instead of depositing it in your account. they can get away with that for a month or two before someone notices the deposits aren't hitting their account. One phone call and you see the accountant and a few other being lead out in handcuffs. Been there and done that.

Where a person gets in trouble is a DEFINED BENEFIT plan - such as ones offered by companies like Ford Motor and the like. The company has to fund the pension for future liabilities and should pay into the plan every year to build the balance. If there's not enough cash to pay the plan's expenses in a year (health insurance goes through the roof) the company has to contribute more to cover the short fall. If the pension as a huge surplus the company can "borrow" the money out the plan to pay operating costs. Company goes bust, the loan goes bad and the pension people are working at Wally World. Basically you have an agreement with the company to keep paying you after you quit/retire - but if they go under (International Harvester) your pension disappears with them.

Other plans similar to 401(k) involve the employees buying the company's own stock (HUGE MISTAKE IMHO). The company will sell their stock at a discount to the retirement plan on certain conditions, like the stock must be held for 2-5 years before being sold, there will be "blackouts" where the plan can't sell the company's stock (like when it's crashing). Enron is exhibit "A" on the perils of this type of plan.

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