Retirement Plan Security Inspection

Tip! Follow Basic Investment Principles - Just remember that how much you have for retirement depends on the type of investments you make now. Learn how to multiply your savings using mutual funds, stocks, bonds, etc.

Given recent events in the news, many employees have begun wondering what would happen to their 401(k) dollars if their company were to go into bankruptcy, out-of-business, or was merged or acquired by another firm. This is a question that few employees think about when making contributions to their company retirement plan. Yet, in the economic environment of today where corporate closings and restructuring are not uncommon, it makes sense to know what level of safety exists.

Retirement plans are managed exclusively for the benefit of participants by plan officials called fiduciaries and trustees. A fiduciary is any person who exercises any discretionary authority or control over the management of the plan or its assets, or any person who is paid to give investment advice regarding plan assets. A trustee has the responsibility of collecting and holding plan assets in trust for the participants. The obligations required of fiduciaries and trustees means that they are ultimately responsible and held accountable for the safety of the participants’ money.

Tip! Join a Cause ? Retirement does not mean that you are worthless. To derive a feeling of self worth and fulfillment, commit yourself to a worthy cause that you truly believe in.

It is important to know that there are laws specifically designed to protect the interests of qualified retirement plan participants and their beneficiaries. The Employee Retirement Income Security Act (ERISA) was passed in 1974 to specifically protect the retirement plan assets of qualified retirement plan participants. For defined contribution plans - such as 401(k)s - the Department of Labor (DOL) and the Internal Revenue Service (IRS) also oversee various rules and regulations to enforce fiduciary compliance, participation, vesting (ownership) and funding standards.

Under the various rules of ERISA, benefits under a 401(k) plan are protected from creditors if a company goes bankrupt. No matter how much a struggling company may need access to funds, they cannot use plan assets for such purposes as buying equipment, paying rent or paying creditors. Your retirement dollars are held “in trust” for your benefit - not for the benefit of your company.

Tip! Save money. Before retirement setting up a savings account or 401K will get a person prepared for life without a steady paycheck.

Participants are always 100% vested in their own contributions to a 401(k) plan. While it usually takes several years to become fully vested in any employer contributions, if a qualified plan is terminated, the employees immediately become 100% vested. IRS approval must be received before any qualified plan can be terminated. Once approval for a termination is obtained from the IRS, the full amount of plan assets are distributed to plan participants.

Baby Boomer Retirement Benefits Retired. 27 @ 75%.

If you would like to know more about ERISA, or if you require more general information regarding qualified retirement plans, such as a 401(k) plan, contact your financial advisor. After all, the more you know about your retirement plan, the more secure you are likely to be upon retirement .

Fearing the American worker is being left in the dark, Mr. Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their retirement plan.

Bookmark to: