| Sargent & Lundy Savings Investment Plan |
| THE SAFETY OF 401(k) PLANS |
| The following excerpts are from an article in the Thursday,
October 16, 1997 "Chicago Tribune". The opinions of the author,
Harriet Johnson Brackey, may or may not reflect those of the SIP Committee.
Like Ines Bleakly and millions of other people, you put your money away, week after week, month after month. But will it be there when you're ready to get to your 401(k) investment savings accounts? Most likely, pension experts say. But not always, as federal investigators are finding in a small but scary number of 401(k) plans. And often, not when you want or need it, as Bleakly and the 60 Miami employees of a defunct Venezuelan airline are finding out. "Since the end of February, these people have been stuck without jobs and they don't have any access to their savings," said Gersan Zurita, who was the plan administrator as Viasa's general manager. "My concern is the safety," says Bleakly, a 47-year-old mother of three and a former cargo supervisor who wants to roll over a six- figure account. "My concern is what is my money doing." Sometimes - rarely, but sometimes - the money disappears. According to recent statistics from the Labor Department, federal pension experts have conducted almost 2,000 investigations of 401(k) plans nationwide since October 1995. They have found hundreds of violations of federal pension laws, recovered $23.3 million in missing money and returned it to the retirement accounts of 29,860 workers. That's why you should be vigilant about your 401(k). You should read and save every document that comes with the plan. Learn who the trustee is. Pay attention to how you can get your money out and when. Note who takes complaints. With your retirement nest egg at stake, fear is natural. But your worries shouldn't be too big. Compare the $23 million recovered to the $1 trillion that is on deposit in all 401(k)s. Or the 1,971 Labor Department investigations to the 200,000 401(k) plans out there, taking money regularly from 22.5 million participants. "In the overwhelming majority there has never been a problem," says David Wray, president of the Profit Sharing/401(k) Council of America. "There are very, very few problems." Viasa's employees say things weren't right about the plan from the start. They say they never received the summary plan description, an essential document that would have told them the name of their trustee, how to make complaints and the rules for withdrawals. Howard Marsh, the federal regional administrator in Atlanta who handles any complaints about South Florida's 401(k) plans, says the point at which problems often develop is when contributions are supposed to be made but aren't. An employer whose company is sinking may not put all or any of the employee's salary into the account. That's apparently not what happened at Viasa. The money did go into the accounts and because of that, it has a web of federal pension law protections, such as: * The money is held in trust and must be managed according to certain standards of prudent investing. * The plan has to be audited - and a Clinton administration proposal calls for even more complete audits of money held trust by financial institutions. * Reports have to be made to the IRS and the Labor Department. * In the case of a company going out of business, 401(k) funds are protected from claims of creditors. Here are warning signs to watch for**: * Your 401(k) statement is consistently late or comes at irregular intervals. * The amount being put into the plan doesn't match what's taken from your paycheck. * Your contributions show up late. (A Labor Department rule says your employer must put your money in your account within 15 days after the end of the month.) * The opening balance doesn't match the ending balance on the last statement. * The investments listed aren't the kind you authorized. * Your directions on allocating the money to various accounts aren't being followed. * Frequent and unexplained changes in investment managers or consultants. * A significant drop in the account balance that can't be explained by market ups and downs. **Source: U.S. Department of Labor, National Center for Retirement Benefits Inc. |
This page updated on 10/27/97