Newspaper article St Louis Post-Dispatch (MO)

Firms Can Jeopardize 401(k) Funds

Newspaper article St Louis Post-Dispatch (MO)

Firms Can Jeopardize 401(k) Funds

Article excerpt

In the six months between January and July of last year, the average stock mutual fund earned 22.53 percent, according to Lipper Analytical Services.

But not John Drexler's retirement portfolio. Drexler thought he was harvesting the stock market's gains, but instead was earning a mere 2 percent on money his employer had parked in a money market fund instead.

Drexler (not his real name) estimates he missed out on about $600 in earnings while his large Northeastern employer ruminated about where to p ut the money.

He's not happy, and complaints like his have the Labor Department breathing down the throats of slow-investing employers. A new proposal from the department would have companies racing to invest employee retirement contributions within a few days of payday.

What's the problem? There are a few.

The most serious are the usually small company employers who "borrow" their workers' 401(k) retirement assets to fill cash-flow needs and fail to invest the funds for the worker in a timely manner, or in some cases, at all.

Ted Benna, president of the 401(k) Association, reports that he has received about a dozen calls from workers whose small companies went out of business without ever depositing their retirement contributions.

The Labor Department is investigating more than 600 complaints of companies not depositing the money in time, and takes them seriously enough that it has instituted an amnesty program for employers who are delinquent in their deposits.

From now until Sept. 7, 1996, employers who have played fast and loose with their employees' retirement funds can pay up and avoid possible criminal and civil penalties. The program is not available to employers already under investigation, or who are more than a year in arrears.

There are other reasons why retirement investments are not made in time. The current Labor Department rules, which require companies to deposit the money as quickly as possible, but no later than 90 days, has been interpreted too often by too many companies to mean 90 days, according to Rich Koski of Buck Consultants. …

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