Sunday, August 26, 2012
Bankrupt firms employees get frozen out of their own 401(k) accounts -- can this really happen?
A lot is said today about ownership of retirement accounts (as in the social security debate), and 401(k) is supposed to offer the future retiree control.
When a company goes bankrupt, the 401(k) assets of employees are supposed to go to them immediately.
But here is a story in the Business Day section of the New York Times by Gretchen Morgensen, “When a 401(k) is locked in the freezer”.
A company Penn Specialty Chemicals in Memphis TN went under (with a Chapter 7 liquidation), was partially acquired by a French company, and employees were given the choice of transferring to the acquirer or letting the old management company, Vanguard, manage the accounts.
Some employees who left the money at Vanguard have found themselves not able to use it for three years, although they could switch accounts among it.
The link for the story is here.