Posted On: April 29, 2010
If Your Employer is About to Roll Over, Be Sure You Roll Over Your 401(k)
Business bankruptcies are on the rise, and if you are employed by an organization that files Chapter 11 bankruptcy, it could significantly affect your 401(k) plan.If your employer is a publicly traded company and a sizeable portion of your 401(k) is in company stock, then chances are your plan will take a big hit (think Enron).
In fact, because of large corporate failures like Enron in the past decade, most people are aware that having a large share of your company’s stock in your 401(k) is not really a good idea. Your plan should be as diversified as any other stock portfolio to minimize risk.
What you may not be aware of is that if your employer files Chapter 11 bankruptcy and, as a result, has to terminate the company’s 401(k) plan, you and your fellow employees could be on the hook plan termination costs. The plan’s administrators will have to be paid, and if there are no company assets to do so, the investors in the plan will be charged on a pro-rata basis to fulfill that obligation.
If it looks like Chapter 11 bankruptcy could be in your employer’s future, it is probably a wise move to roll over your 401(k) into an IRA. If you find a new job, be sure you roll your old 401(k) into your new employer’s plan quickly – or, again, into an IRA.
If you need more information about Florida Chapter 11 bankruptcy, contact our Jacksonville, Florida bankruptcy law firm.
Greg Gilbert
Keith Maynard
