How long does it take to get the money in your 401 profit-sharing plan or employee stock ownership plans when you change jobs or retire?
Longer than you might think.When Lorry Miceli, a nurse in Durham, N.C., changed jobs in October, she tried to roll her 401 account into an IRA.
But neither she nor 300 other employees who were laid off from the company last fall have yet to receive a dime of their savings. "It's been seven months," she complains. "How long do I have to wait?"
"That's the most frequently asked question we get," says Samuel Murray, vice president for government affairs of the Profit Shar-ing/401 Council of America. The Washington trade group gets a lot of calls from people wondering how long their ex-employer can hang on to their savings.
The answer isn't especially comforting. Legally, employers can wait until 60 days after the year in which you turn 65 years old to turn over your retirement savings; even if that is decades away. ESOPs can take as long as a decade.
As a practical matter, however, most employers turn the money over sooner than that - typically, within months after you leave the job. Many companies wait until after the quarter has closed. And rules for different age groups may be different. Employers have a lot of latitude.
For instance, departing employees under age 55 at Columbia/HCA Healthcare Corp., based in El Paso, must wait one year before they can transfer the assets out of the plan, which consists of company stock and mutual funds. But exiting employees over 55, or with 10 years of service, can transfer their accounts to an IRA in only four to six weeks. (Prior to January, employees had to leave their assets in the company plan for five years.)
Many employers do a rotten job of explaining what the rules are, which leads to a lot of unnecessary fretting among ex-employees, says Murray. "Particularly if the balance is fairly large, you get a little paranoid if you don't understand the explanation about why you're not getting it. You just think you're being put off," he says.
There are, of course, cases of employers stealing assets or losing all the retirement money in woebegone investments. So, an employer's reluctance to cut a check to a departing worker could be a red flag. Most of the time, though, it just means the bean counters are abiding by the rules or bungling the paperwork. Or both.
Under its operating guidelines, Miceli's former employer, Hori-zon/CMS Healthcare Corp., an Albuquerque, N.M., operator of long-term care and rehabilitation facilities, would have distributed her 401 money in January. Because the plan is updated quarterly, requests made last fall for rollovers could have been processed only after Dec. 31.
As the months rolled along, Miceli continued to call Horizon's benefits department to ask about the status of her rollover. She was told to call Merrill Lynch & Co., the retirement plan's administrator. She says she got no answers about the delay from Merrill Lynch, either.
Who is to blame for the snafu? Leslie Moss, the benefits director at Horizon, says it can't distribute the money until it receives valuations from Merrill, which she says are late. September valuations, for example, arrived on April 11. Mean-while, a spokeswoman for Merrill says that after receiving year-end information from Horizon at the end of February, Merrill completed the qualified account valuations and statement processing necessary for making employee distributions.
After that, Merrill says, the responsibility for handling distributions became someone else's prob-lem since Horizon dumped Merrill as its plan administrator. With a new administrator taking over April 1, paperwork has been further delayed, so it is unlikely Miceli or the other former employees will see their money before summer.
Still, they would have to wait a lot longer if their money were in an ESOP, which is governed by different rules. If you are fired or quit, employers can wait five years to begin making distributions from ESOPs, and can take an additional five years to pay all the money out. If you retire or become disabled, the employer must distribute the money within five years. In practice, however, ESOPs commonly dis-tribute the money in two to three years, says Michael Keeling, president of the ESOP Association, a trade group in Washington.