Newspaper article St Louis Post-Dispatch (MO)

Keeping 401(k) Honest Up to Workers

Newspaper article St Louis Post-Dispatch (MO)

Keeping 401(k) Honest Up to Workers

Article excerpt

How many companies will turn themselves in under the Labor Department's new amnesty program for mismanaged 401(k) plans? The government has mailed out only 50 information packets so far, mostly to third parties like law firms. It remains to be seen how many will advise erring clients to 'fess up.

With a 401(k), the company deducts money from workers' paychecks and invests it in tax-deferred retirement accounts. There are some 228,000 plans in the United States today, holding $675 billion for 22.3 million employees, according to Access Research in Windsor, Conn.

But a few companies deduct your money and hang on to it. Or they "borrow" from the 401(k) plan and go bankrupt before repaying the loan. These are mostly small or middle-size companies, says Olena Berg, assistant secretary of the Labor Department's Pension and Welfare Benefits Administration (PWBA), which administers pension-plan law. No large company has been known to violate its employees' trust. Around 660 potential abusers have come to the government's attention, mostly on tips from worried employees. Of these, 74 have made partial or full restitution so far. Around $7.4 million has been recovered for employees. More than 150 cases have been closed with no money owed, although there may have been other infractions, such as failing to give employees the proper annual reports. Under the amnesty, companies that were shorting their plans prior to April 6, 1996, can come forward, say "Gee, I didn't mean to," restore the money plus any gains that would have been earned, and escape the fine that the government normally would charge. The employer does have to tell its workers that money was restored to the plan, but doesn't have to say how much. No further explanation is required. The amnesty lasts until Sept. 7, 1996. If firms don't come in, and are later found to be using 401(k) money illegally, they face a 20 percent penalty plus the risk of criminal prosecution, Berg says. Many large companies hate the amnesty plan, because they think the publicity is giving 401(k)s a black eye. "People are panicking, people are contributing less to their plans," says Lynn Dudley, director of retirement policy for the Association of Private Pension and Welfare Plans (APPWP), a lobbying group. …

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