401k Witheld But Not Deposited By Employer

[ehong33234]

California.

Was working for my company for almost 6 years. The company is doing very poorly financially so I got laid off. I have been contributing to a Fidelity 401k provided by the company for 5 years each paycheck. Upon being laid off yesterday, I was told that in 2010, none of my 401k withholding's were deposited into my 401k. Deducted from my paycheck, but not deposited. So I asked the question "where is my money then and why didn't I receive notification at the beginning of the year?"

"The CFO replied that they were having a problem with the 401k since two of the executives were only depositing the maximum withholding while other employees were not doing the maximum."

How in the world does this affect my 401k deposit? Should it? I smell something fishy, like a company going under trying to reinvest employee 401k withholding's back into revenue.

Anyone have thoughts?What is the name of your state (only U.S. law)?

 

[cbg]

Do not pass go. Do not collect $200. Run, do not walk, to the nearest phone, and call the US DOL to report this. This is so illegal I cannot even tell you. Employers go to jail for this.

 

[Beth3]

Agree. I think the CFO was getting at the company's failure to pass a "discrimination test" regarding the contributions. Basically, that means that the top 10% of the most highly compensated employees cannot contribute more than "X"% to the 401(k) Plan than the remaining 90% of employees. (The specifics elude me at the moment.) However that test is performed AFTER the Plan Year is completed and all contributions for the Plan Year are made. If the test is not passed, it means contributions are returned to the most highly compensated employees. It DOES NOT EVER result in employee contributions not being forwarded to the investment advisor.

If your statement is accurate, then your employer is absolutely violating ERISA regulations and criminal statutes. Contact the federal Department of Labor immediately. Yup - CEO's and CFO's go to jail for this. I know of several that have.

The U.S. Department of Labor Home Page