401k

[RICKO]

Hows everyone doing, this is slick rick. I'm planning to pull my money out of my 401k because the Corporation that I work for is a little shady right now(and what I mean by that is that they are possibly filing for bankruptcy) and I don't want to end up losing all my money. I read that congress has allowed for Corporations to get away with murder in essence not having to pay people the pension that they for so many years have sacrifice to save. So my point is that I (if possible) want to pull my 401k and not have to pay the massive tax penalty. I forget what percent the tax penalty is right now but it isn't good I can tell you that If there is solution fine, but if no solution exist that's fine to either way the money is coming out

[idknow]

Originally Posted by RICKO

Hows everyone doing, this is slick rick. I'm planning to pull my money out of my 401k because the Corporation that I work for is a little shady right now(and what I mean by that is that they are possibly filing for bankruptcy) and I don't want to end up losing all my money. I read that congress has allowed for Corporations to get away with murder in essence not having to pay people the pension that they for so many years have sacrifice to save. So my point is that I (if possible) want to pull my 401k and not have to pay the massive tax penalty. I forget what percent the tax penalty is right now but it isn't good I can tell you that If there is solution fine, but if no solution exist that's fine to either way the money is coming out

bazigly, devest the money,
pay the fine,
study here all that is relevent (and not so relvent
sue em for taxing your right to work

[Phssthpok]

Originally Posted by idknow

bazigly, devest the money,
pay the fine,
study here all that is relevent (and not so relvent
sue em for taxing your right to work

AND...untill such time as you are comfortable with your knowledge level to divest said money without the penalties.....You can do a direct rollover of funds from one 'qualified' retierement plan into another 'qualified' retirement plan without penalties or witholding.

For instance:

You have money in a 401(k). You want/need to move it for whatever reason (the options suck, your being forced out as a reult of losing your job....whatever). You can set up a TRADITIONAL IRA (not a ROTH)and direct the 401(k) administrators to do a direct transfer of funds into said IRA. Since you never take possession of the funds, there is no automatic witholding, and since it remains in a 'qualified' retirement account, there is no early withdrawal penalty.

HOWEVER.....you may not want to do this. Like most people it seems you are confusing the nature of the 401(k) account with that of an employer funded pension plan.

In simple terms:

A pension is a completely 'in house' fund established and maintained by the employer. This fund is (illegally) raidable, since all controll is 'in house'. Also, if the company should fold, then there's a good chance there's not going to be any money to fulfill the obligations to the pension fund.

A 401(k) fund is established by the employer with another company (a bank, investment company, insurance company... what have you) acting as administrator. Once the company establishes the fund, the only thing they can do is add money in the form of contribution matching.....and once they match.. that's it... the money is yours.. they can't take it back*. Realy, the only way you could lose this fund is through bad investments, or if the fund administrators company folds.

Do a little more research into the nature of the beast before you panic about your 401(k). I'm sure you'll find your FRN's are not in as much danger as you think.




* I am assuming of course that you enjoy full vestment of all employers contributions at this point.

[REDCLOUD]

A pension plan can be adopted by any taxpayer with employees. These plans are "trusts" under state law, and the Internal Revenue Code recognizes various "types". Pensions; profit sharing; pension and profit sharing;ESOP's; SEP's; IRA's are some of the "types" that can be adopted under the tax law. All of them have one thing in common, an employer can make a contribution of money to the plan based on a percentage of each "qualifying" employee's wages. Participation in the plan is almost always optional at the choice and discretion of the employee. Section 401(k) allows the employee to make non deductible contribution of his own funds in a lesser amount as well to his "account". The maintainence and investment of the money is independent of the plan. Typically the money is invested by and held on deposit at a bank, brokerage house, or insurance company in large companies. These "agents/trustees" usually direct the investment of the money. However, certain larger and older companies, like US Steel, did not historically provide enough funding to adeqately provide for all the retiring employees. Hence, people have said that the company "raided" the plan. Significant changes in funding requirments have not allowed this in newer companies, although, international employees are poorly protected. Some companies use third party managers, such as financial planners and CPA's to direct the investments, but the funds or securities are almost always held at a brokerage firm. Most plans require some period of service (employment) before "vesting" begins. It is the "vested" balance that can be rolled over into another "qualifying" plan, such as an IRA or SEP or another "qualified" plan.

Since these are basically trust agreements that meet IRS guidelines, any plan document will do. Banks, brokers, and insurance companies do these agreements en masse and therefore get "determiation" letters from the IRS which tell them and you in advance that the "qualify", however, such "determination" letters are not truly necessary, just defensive in nature when selling large blocks of these like banks do. Creating a plan with your own document or with one purchased from a bank or broker makes it easy to roll over the money or securities. These plans can easily be designated as self directed and managed. Since plans do not pay tax on earnings and they are trusts they are ideal places to retain funds. The Department of Labor publishes a list of qualified investments but any thing that does not constitute a trade or business is acceptable. Recently, they have allowed interests in LLC's and "S" corps to be included as investments, therby radically increasing your opportunities. For example, Should you choose to acquire a real estate investment property in an LLC owned by your non-taxable/plan trust you can use your non taxed money to acquire and rehab it. The gains on sale flow back non taxed as well. Since it is a trust and LLC you have automatically achieved a great deal of creditor protection and anonominity as well. Better yet, non of this ends up on your tax return.

To me, the pension plan is better than "hiding assets offshore", developing marginal identity theories, or evading taxes. These things pay no tax completely legally.

[RICKO]

I know I'm kind of late with this but for those who are still interested, I have an article (TIME LIFE) that explains a little more in depth about what's going on with 401k's and how corporation's are getting away with not haveing to pay. Give me a little time to get this article on the forum or you can look for it on the TIME LIFE website. Thanks alot for your patients.