401k Contribution Question

[delkins]

What is the name of your state (only U.S. law)? California.

My employer no longer allows employees in my division to make contributions to their 401k plan. This has nothing to do with company contributions, they stopped those last year. Effective, Jan 1, 2010 I am no longer allowed to make any contributions to my own active 401k plan. Is this legal? I have tried to get an answer from the HR department concerning the likelihood that the company is planning to retire the plan. I have been told in no uncertain terms that there is no plan to retire the 401k and I will be given any updates when they become available. Another caveat to this is that employees were given absolutely no notification of this in writing or verbally. I found this out when accidentally checking my paystub online. Obviously, this is a huge problem for me in that it shows that I am enrolled in a 401k and thus cannot contribute to any outside plan.

Thanks in advance for you advise in this matter.

David

 

[swalsh411]

If they follow the rules in the plan document then yes it's legal to stop contributions or shut it down entirely. A company is not required to offer a 401(k) to their employees. Why in the world would prior contributions to a 401(k) stop you from putting money into another investment product on your own going forward? That doesn't make any sense.

 

[Beth3]

I find your employer's decision very peculiar and frankly, I don't get it. I suppose your employer will save a few dollars on administrative costs by not allowing any current contributions but still, this is just goofy.

delkins, you should ask your HR Department for a copy of the 401(k) Plan Document. They must provide you with a copy upon request. You need to read it carefully to see if it allows the employer to cancel employee contributions, whether with or without notice.

If they refuse to give you a copy of the Plan or you believe the employer is in violation of the Plan, contact the federal Department of Labor.

 

[delkins]

Swalsh411: I am not able to put money into any outside retirement investment simply because my status is listed as "currently joined in a company 401k". IRS rules do not allow me to invest outside because of this.

Beth3: Thanks for your advice. I will try to secure a copy of the company 401k Plan Document.

 

[delkins]

Beth3: I was able to find a copy of the Plan Document on Fidelity's website. I went through the document and nowhere does it state that the company has the right to cancel employee contributions. However, it does state that the company reserves the right to make changes to the plan at any time and from time to time by written action. The plot sickens. If you like, I can forward you a copy of the Plan Document if you have the time to look it over.

Thanks so much for your guidance,
David

 

[swalsh411]

Your "status" with what entity?

There should be amendments to the plan then. If not, I would contact the DOL because the plan is not being followed. Not following the plan document is not a small matter.

 

[delkins]

I went on the DOL website. The law is that the company needs to file an amendment to The Plan. But, here's the kicker. They have up to 210 days after the end of the calendar year in which the change was implemented. So there ya go. Score one for the lawyers.