SHAKING IT LOOSE. money, after employment termination - 401k - includes credit card information - Brief Article

Kiplinger's Personal Finance Magazine, March, 2000 by Mary Beth Franklin

Companies can sit on your 401(K) MONEY for months after you leave your job.

IN THESE DAYS of instant everything, job switchers may be stunned at how long it can take to pry 401(k) money away from their old employer. Matt Baker certainly was.

When the 31-year-old left his job at an Indianapolis engineering company last July, he asked that his 401(k) balance of about $10,000 be rolled over into an IRA--a savvy move, of course, because a direct transfer meant there would be no tax withheld. And sticking the money in an IRA guaranteed a continuing tax shelter for his nest egg.

But three months later his stash was still parked in his former boss's 401(k), despite his repeated calls to check on the transfer. "No one seemed to know what was going on until the check showed up at my broker's office in November," Baker complains.

There was really no mystery. The rules of the 401(k) plan call for checks to be distributed at the beginning of the quarter following the employee's departure. Since Baker left in July, his check couldn't be cut until October 1 at the earliest. His final statement showed the value of his account as of September 30. That's the amount his broker received by check on November 2.

And why the extra month's delay? Basic bureaucracy, says the plan administrator. "I lost a month's worth of earnings," Baker complains.

Unfortunately, says David Wray, president of the Profit Sharing/401 (k) Council of America, four months is not an unreasonable delay. There is no time limit on 401(k) transfers, and companies may hold on to your retirement funds until you turn 65.

In most cases, though, departing employees get their money within 90 days. The increasing use of daily valuation for 401(k) balances means that more companies are making payouts within a week or so.

What can you do to expedite things if you switch jobs? First, find out the rules of your plan. Check with your benefits officer or, if you're concerned about tipping off the boss about your plans to quit, ask for a copy of the plan document and check the rules on distributions to departing employees. If your plan, like Baker's, makes only quarterly payouts, leaving at the end of a quarter rather than at the beginning could speed things up.

Also, be prepared to bird-dog the transfer. If your company uses an outside firm to administer the plan (as most do), make sure you have the contact number for someone to bug.

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([double dagger]) expires after six months

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