The Money’s Yours, Not the Boss’

With all the talk about future troubles in the Social Security system, planning for retirement may well mean looking out for yourself. Once that involved working toward a traditional pension, one your employer established with a plan of defined benefits to be paid out as long as you lived. Now the employee savings plan, the 401(k), is rapidly replacing the traditional pension. Employees make decisions on what the investments are to be, but employers administer the plans.

Study those 401(k) statements carefully. The Labor Department, acting earlier this month to close a loophole, will require employers to invest 401(k) employee contributions more promptly.

While the vast majority of plans are well-run, Labor Department investigators say a number of employers had taken undue advantage of regulations that require employee contributions to be invested as soon as possible and no later than 90 days after the savings are deducted from paychecks.

Some firms, many of them suffering financial problems, have temporarily diverted retirement funds for their own use, in effect writing themselves interest-free loans during the 90-day period. As a result, workers lost additional earnings that the funds could have generated if deposited promptly. A Labor Department enforcement project, begun last year, helped to return $9.8 million to workers’ retirement accounts and brought 56 criminal charges against employers alleged to have misused workers’ savings.

Under the new requirement, which will take effect in six months, employers will have to deposit 401(k) funds to employee-designated investment accounts within 15 days of the end of the month in which the paycheck is issued. The quicker deposits will increase the value of 401(k) plans nationwide by $76 million in 1997.

Some corporate benefit plan administrators are grumbling about extra paperwork resulting from the rules. But the 23 million workers now participating in 401(k) plans deserve timely postings to their retirement accounts. Closing the 90-day loophole was prudent. You’re not saving if you don’t put it away and keep a close watch on that nest egg.