401k vs. profit sharing

[jusdis1]

I left a company 4 months ago and opted to have my 401K monies distributed to me in one lump sum. The company has a policy (unwritten) that they retain the monies in the Profit Sharing part of the account for one year. My question is in regard to the legality of this practice. Are the VESTED monies not mine? Can they legally hold back funds that belong to me without my consent? If they cannot what course of action should I take?

 

[ALawyer]

What does the PLAN say? Was the plan approved by the US Department of Labor and the IRS?

 

[jusdis1]

How would I go about finding that information out? I asked the plan administrator and all she would tell me was that it was part of their plan. How do I find out FOR SURE?

 

[dougsbpc]

I happen to be a plan administrator.

The employer probably has this procedure because the salary deferral portion of your account is self-directed (i.e. you invest the money), and the profit sharing is pooled (you do not invest the money). The pooled portion of the account is often valued once per year (usually the last day of the company fiscal year). At that time earnings (generated from the pool) are allocated to participant accounts. This type of procedure is common.

Here is what you should do. Find out if other terminated employees were treated in the same manner as you. If not, contact your local department of labor office and have them investigate.

As long as the plan has a policy of distributing profit sharing a year later and all terminees are treated consistent, there is nothing wrong.