Employer 401-K Bait & Switch...................???

[JamLazyAss]

My wife has been at her current place of employment for one year.
She decided to start having money taken out for a 401-K.

Her employer matched 100% for the first 3%, and .5% for +3 to 5%.
Sounds simple.

Well she submitted the form a couple of weeks back. Yesterday she receives a memo from her employer stating that they no longer contribute to the 401 program.
So my wife decides it's not worth doing it then as she only works part time.
She contacts the appropriate people and tells them to cancel it.
They tell her, sorry you can't cancel. But you can make a withdrawl if it's a hardship situation??
She says, WTF are you talking about? She hasn't even had a single dollar invested yet?

The person on the phone says you can
a) Hardship withdrawl
b) cancel out in one year
c) change the percent deducted every quarter

Does anyone else see something wrong with this picture?
What a seedy bunch...

[Coyote]

It's been a while since I worked for another company but IIRC, 401k elections where only once a year. I guess if she can change the percent then do that?

[flstci1]

If she can change the percent then ask if 0 percent is possible............

[harleyjt]

Have her change her percentage to the lowest % they will accept. They probably don't allow any fractional amounts, so lowest % would be 1%.
jt

[CraigArizona85248]

Don't be too quick to blame the employer.  I'm pretty sure these types of rules are dictated by the federal government.  Like the others suggested, drop the contribution to the lowest you can.

-Craig

[tnicean]

Everything depends on what the plan written document says.  Some will only allow a change in the election once a quarter.  In days past some only allowed a change annually.  The employer probably has a discretionary match and can't afford to match the deferrals right now.  A lot of companies have suspended or stopped their matching contributions.  Also, once money goes into a retirement plan, it can't be paid back out except for certain distribution events like death, disability, age 59 1/2, termination, etc.  This too, depends upon the plan language and federal regulations.  I wouldn't call it a bait and switch.  It is just the economic situation.
Tnicean

[Princess Butt]

Many companies are axing their matching contributions to 401k plans. It's one of the first things to go on the chopping block when times are hard; usually, 401k match is cut long before executive perks.

It does depend on the plan document. The plan document is what the company sets up as their 401k plan with their provider. This essentially says when you are eligible for enrolling, when you can change your contributions, etc. etc. etc..... Unfortunately, many companies write their plans so you can only change your contribution level once a year. At my company, we don't put those kinds of restrictions in place, because we want to encourage people to participate in saving towards their retirement. Also, being a smaller company, it's not that hard to change the contribution level per paycheck.

It's actually very easy for a company to change the plan document. We've changed ours several times over the past 12 years. We've eliminated a minimum age, contribution from the employer, enrollment limitations; we've made it much easier for employees.

I would put some money in anyway. Just be careful of any 401k or retirement plan when you end up with stock in the company you're working for. My sister had that once, and after she left, she tried to cash it out and the owners of the company ran off with the company assets, and it was worth 1/1000th of what she paid for it. Her last job was also in company stock, and after they laid her off, I told her to cash it in NOW. No sense in letting history repeat itself.

BnEUC

[Faast Ed]

What a seedy bunch...

Might just be a hurting bunch,......  this economy is doing some serious damage to businesses.

[mark61]

   I never did feel comfortable with the 401k   thing.  Way I understand it the company only has to show they actually have the money is ONE TIME A YEAR!  The rest of the time they can use it or loss it for anything they want and if they loss it, well TFB  sue us!....The whole purpose of a "company" or business is to make money for the owners---not the slobs working for them!     See the pay and bonus for CEO's today----430 times what the employees make!
   Trust the company with my money? NFW!

mark61

[apendejo]

I went online a few days ago to check out my 401k
They had a little window you could go into to see how your account compared with people "just like you".
It seems people "just like me" still have the same amount of money that I had a few months ago before 41% of it disappeared. Looks like I am going to be stuck working for the man for a few more years.
AP

[PoorUB]

   I never did feel comfortable with the 401k   thing.  Way I understand it the company only has to show they actually have the money is ONE TIME A YEAR!  The rest of the time they can use it or loss it for anything they want and if they loss it, well TFB  sue us!....The whole purpose of a "company" or business is to make money for the owners---not the slobs working for them!     See the pay and bonus for CEO's today----430 times what the employees make!
   Trust the company with my money? NFW!

mark61

Depending on the company you are not trusting your employer with your money. Your 401K money gets put in an account of your chosing with a private investment company. Your employer has little to do with it once they send out the check to the investment co.
Now there are some 401K's that are held by the company, usually in company stock. My wife worked for a company like that for a couple years, and over the last twenty years her fund with that company keeps losing money, and we can not buy out of the fund so we just watch it fade away. The only good thing about it is it was a company profit sharing plan where the stock was given to her, it was not money she pulled from her paycheck. Twenty years ago it was $5000, last time I saw a statement it was $1700! At least in my retirement plan it generally gains value, at least over the long haul!

[JamLazyAss]

I guess it comes down to this:

Your employer hands you the information with all of the detail.
You make your decision(s) based on it.
You sign up, the company says April Fools!

Why wouldn't the company be held to the same time constraints as the employee?

She is going to leave it as-is, but I agree with her that this stinks.

[~JC~]

That's too bad, but maybe not as bad as it seems. A 100% match is amazing. 50% is considered generous by most standards. Plus, just because there is no match it may still be right for you. Don't forget, the money is taken out before taxes and earns interest tax free until withdrawal, when you will theoretically be in a lower tax bracket. No doubt you get to direct the investment, so be careful. As others have said, the market is terrible, I lost 31% last year. Good luck. ~JC~

[~JC~]

Plus, remember that if you are over 50 (like some of us ), you are allowed a "catch-up" contribution of 5K per year. If this applies, you can have 20K/year taken out tax free. That can certainly reduce your tax burden.  ~JC~

[truck]

I bailed out of the market a couple of years ago and I am so much better off now than I would have been if I stayed in.
Made a bunch of $$$ while I was there though on some stocks and also lost some dollars. But overall I'm good now.

[Faast Ed]

We drew ours out last year. Felt real guilty about it until we saw the market crashola. Daaaang sure no regrets, now.
Would have had 1/2 as much to draw from, and the debt we paid off is would have still been there.

[JamLazyAss]

We drew ours out last year. Felt real guilty about it until we saw the market crashola. Daaaang sure no regrets, now.
Would have had 1/2 as much to draw from, and the debt we paid off is would have still been there.

Fortunately, so did I.

[Sc00ter]

Plus, remember that if you are over 50 (like some of us ), you are allowed a "catch-up" contribution of 5K per year. If this applies, you can have 20K/year taken out tax free. That can certainly reduce your tax burden.  ~JC~

The limit was raised again in 2009...  You can put up to 16,500 plus 5,500 catch up contribution if you are 50 or over...

[~JC~]

See! It's even better than I thought! Thanks for the correction. ~JC~

[apendejo]

So where do I get this extra 5500 bucks to add to my 401k? Is this part of the feds stimulization package
AP

[jazzman713]

 has anyone heard about this thing obama was talking about where you could take 10,000 out of your 401 with out any penalty

[98roadking]

A 401k is a form of profit sharing. The company contributions are set but can go higher. For about 6 straight years our company, which has a 50% match, gave 100%. Things were good, now not so much. So thye have halted the contibutions, which amounted to $40k per month. That has saved a couple of jobs. You still get the benefit of the tax free money that you put in, put it in the correct account and you make more. Mine like the others went down last year with the stocks, but since my wife said I have to ork for 15 more years I will ride it out. I see it this way, I'm geting more stocks for my money now and when  it turns around it will gain even more.

[HIPPO]

AP

It's the Porkulus package. 

[Ultrashovel]

With economics the way they are now and the number of companies going Tango Uniform these days, I suspect that many will find their employers cutting back on 401k's if not retirement plans in general. The glory days are over. It's time for belt-tightening.

The new so-called "Obama stimulus plan" appears to only stimulate some of our so-called representatives' and senators' favorite pork-barrel schemes. With small likelihood of much immediate help for corporations and smaller emplopyers, look for ever-decreasing company benefits.

Back in the 70s I worked for an electronics company that had a ESOP that matched employee's contributions 100% dollar for dollar. That was nice when the stock was at $140.00. Then over a period of two years the stock went down to three dollars a share. I got cold feet and sold my 25 shares at $100 and watched the company slowly go out of business. They are completely gone now, not even a telephone number to call. They had a retirement plan that is now defunct as well.

More of this sort of thing is on the way before it gets better. It will inevitably get better but I feel sorry for those who have big money in private retirement plans. Who knows whether the plan will survive the company's extinction.

Happy Trails to All!   

[d-dog]

Actually, when the stock market has tanked like it is, now is the BEST time to be in a 401K.  Sure, your portfolio will show a devaluation, but if you're investing anything at all, you're buying stocks while they are dirt cheap.  With companies like Ford, GM and HD selling so low, you're buying a lot of stock with minimal investment.  In a few years when those stocks go back up, you're investment will be worth 10x what you put into it.  I upped my contributions to the max during this period.  For accounts where you're not contributing, that's a different story - just a big loss.  Even without matching funds, like said earlier, the contributions are still tax free, and you don't pay any brokerage fees.  All in all, not a bad deal.  It's times like these, that will make millionaires - invest now while it's cheap.
Dog

[Faast Ed]

With companies like Ford, GM and HD selling so low, you're buying a lot of stock with minimal investment.

There is no indication that the markets will return to previous values, as a matter of fact stocks can do worse. Good chance of many more bankruptcies this year.
The stock market "heyday" is gone,..... something for the history books.

Anything you invest now will be more like savings, your benefit will be more geared towards anything your employer contributes (with you). 
The "growth" part of the funds won't be like "the good old days" of recent past.

[mackdog]

Some plans also offer a guaranteed return usually in the low range like only 4 or 5 percent.  Not much when the market is doing good but it's better than watching it slowly dwindle down to nothing, like one of mine is doing now.  That 4 or 5 is still more than the one -half of one percent you get in your friendly local bank or credit union savings account.  That's darn near nothing!!!  Also, as someone else mentioned, the government has some pretty hard and fast rules regarding withdrawls on these accounts.  They are meant to get you to put $$ aside to retire on, not to withdraw every time you need a little extra cash, and start up again, that's,why the penalties.  It's definitely not easy to sit an watch it tank, it'll go back up, if you're young enough to wait for it.  MD

[Princess Butt]

Where you invest your money has a lot more to do with how close you are to retirement. If you're under 40, you should have most of your money in stocks. If you're within 5 years of retirement, then you want it in something like Treasury Bills, where the long term return is much lower, but at this point, you're preserving your money.

BnEUC