401k "force out"

snipped-for-privacy@gmail.com wrote on [Tue, 18 Sep 2007 16:15:05 -0500]:

Didn't SGI go out of business?

Unless it was fully invested in a single stock which went under, there's a problem there - they can't just zero out your balance. Unless...

It sounds perfectly reasonable. Have you contacted E-Trade and gotten information about your funds? 401k trustees move to new plan managers all the time. Moreover, most plans also have a requirement that if you're no longer employed and the account is below a certain size (in fact, $5000 is the limit, IIRC) may be forcibly rolled into an IRA. They should have contacted you and you should have had control over where it went - I'm rather surprised they opened an account at E*Trade for you unless they were doing something larger - like moving their whole 401k over there, too. But it's perfectly legal.

Chances are that the account is all sitting in a money-market fund at the moment, though, and you've missed out on several wonderful years of stock market gains, which kind of sucks, but it's too late to do anything about that. Time to plan for the future - what are you going to do with whatever money is still there.

Contact E*Trade and move forward.

No, they emerged from bankruptcy, came out strong, and now they're losing money again (no surprise).

-Will

They may have picked E-Trade because of other relationships they have with them, for example stock options received by employees used to be credited to an E-Trade options account for the employee. Still kind of a crappy move on SGI's part.

-Will

SGI's 401(k) was restrictive, but I believe the company picked up the administration fees instead of the having the fees come from the employee's 401(k) account. And they didn't match in company stock! I guess the biggest issue for the OP may be the one that Bread brought up: what did the OP's funds get invested in at E-Trade? Did the OP miss out on 5 bull market years that he thought he was getting exposure to?

-Will

I'd also ask; shouldn't he have received statements, at least quarterly (?) from Etrade? Even if he missed the transfer notice, the interest on cash (if he got cashed out of any funds) would create activity requiring a statement every so often.

JOE

That's the part that's weird. It's very odd that an account could have been opened in this guy's name at E*Trade without him being notified somehow and/or assenting. When a 401k forces out a small account, the funds have to be sent to either a new 401k or to an IRA, sure - but if the 401k trustee can't find the person, for example, what do they do? They

*cannot* liquidate the 401k as a taxable distribution, but a trustee-to-trustee transfer or check needs a recipient and how can the recipient trustee (in this case E*Trade) establish an account without involving the account owner?

It's a mystery and I'm very curious as to what the actual mechanics here were.

But as I said, other than that oddity, there's nothing suspicious about a small 401k account being forcibly closed out. It's perfectly legal and as someone else said, probably in the best interest of the person whose account it is, too.

In my own case, getting a transfer from the 401k of a former employer was very difficult - the company where it was invested can't do much - you need to be able to contact the trustees themselves and in my case, the company at which I'd worked no longer existed in the same form and tracking down a trustee wasn't exactly simple. I'm *very* glad I rolled that out to an IRA where I don't have to deal with anyone other than my broker.

Will Trice wrote on [Wed, 19 Sep 2007 09:34:44 -0500]:

Or forget that there were supposed to be statements, and forget to check the balance ever over those last 5 years.

Will Trice wrote on [Wed, 19 Sep 2007 09:22:01 -0500]:

Aaaah, I asked because I worked for a local consulting firm that was bought out and at that time forced everyone out of the 401(k), no matter the account size. I wonder if a BK would do similar things.