401k

Why is there a 10% early withdrawal penalty to cash out a 401k?

Before becoming an employment attorney I worked for one of the largest (maybe the largest) provider of 401k services. We provided various investment, customer service and recordkeeping services for 401k plans. Most people who call for information about their 401k plans will end up talking to my former employer or one of their competitors. Most …

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Can you sue your financial adviser under the DTPA in Texas?

Disputes with financial advisers are common, particularly in periods of economic decline and volatility. When things are good most people do not carefully watch what their financial adviser or broker is doing. When things turn south people look to their financial advisers to help them out and problems are uncovered. Sometimes the complaints about financial …

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Vanguard funds targeted in new 401k excessive fee litigation

401k excessive fee litigation has been an active area of ERISA litigation for over a decade with 401k participants arguing the plan administrator–along with various other plan fiduciaries–breached the duty to prudently manage the investment options of the plan. Most of these cases argue the plan administrator failed to select investments with reasonable fees, particularly …

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Unanimous SCOTUS decision in Tibble holds ERISA fiduciaries must continuously monitor 401k investment choices

A flurry of 401k litigation arose in the 2000s over the manner in which 401k plan sponsors select the investment choices and how those choices relate to the fees charged to the plan for various plan services and investments. 401k plan sponsors have fiduciary obligations to operate the plan prudently. 401k litigation asserts breaches of these …

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Dissecting fact and fiction from a recent report on retirement savings

As somebody who spent a decade working in employee benefits and now practices employee benefits law, I have an understanding of the employee benefits industry. When I saw WFAA in Dallas covering a report about retirement savings I couldn’t pass up the opportunity to fact-check. Predictably, the piece mixes a little truth with a lot of …

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Should I invest in company stock in my 401k?

In an article I authored back in 2010 published in the National Law Review I discussed the risks involved for both companies and employees in allowing employees to invest in company stock within their 401k plans. The company stock becomes available through an ESOP (Employee Stock Ownership Plan) within the 401k known as a KSOP. Companies can …

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Should I contribute Roth, after-tax, or pre-tax in my 401k?

It depends. Each option gives you a different benefit and the respective benefits will have a maximum positive impact depending on your current financial situation, retirement needs/goals and your expectations for future tax rates. Pretax 401k contributions Pre-tax contributions provide an immediate tax benefit because you do not pay taxes on income contributed to your …

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Can my employer change the 401k plan or make an exception for me?

Generally, no. The federal regulations that govern 401k plans require that 401k plans do not discriminate against employees. Plans must have uniform rules and the rules must apply in a uniform manner. For example, if your plan permits hardship withdrawals it must establish specific rules for those distributions. Plans can establish some variances in rules across …

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Should I be concerned about 401k fees?

401k fees have come into focus as one of many ways the financial services industry leeches money from the investors. That focus turned into litigation by participants against their plans (and plan service providers). Eventually the Department of Labor instituted fee disclosure rules that require plan service providers to break down fees charged to the …

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Employment Attorney explains: When can I take a 401k loan?

401k loans allow you to borrow against your 401k account tax-free (as long as you pay it all back). The loan payments typically occur by payroll deductions. If considering a 401k loan you should carefully consider he loan terms and the ramifications. Your employer does not have to offer 401k loans and can severely limit …

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Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure these retirement plans provide plan participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) …

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What is the difference between a 401k plan and a deferred compensation plan?

Generally, both plan formats defer compensation because the employee has elected to defer taking cash in hand to obtain some additional benefit, such as deferring taxes on the money or investing on a tax deferred basis. Under more specific legal definitions, there is a distinction between how these different plans work. Today’s post will discuss …

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ERISA Retirement Plan Participant Disclosures

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure retirement plans provide participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that …

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Benefits of staying in your 401k after you leave an employer

When employees leave employment, the common response is to want to sever ties and move on, especially if the employee left involuntarily or on bad terms. However, withdrawing or rolling over your 401k may not be the best decision in every case. There are important financial and legal considerations. Before making decisions about your 401k …

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What is an Summary Plan Description?

SPD is a Summary Plan Description. It is the employee benefit plan documentation that must be provided to all participants and beneficiaries that explains the basic rules of the plan in layperson’s terms. It contains descriptions of the rules for eligibility, participation, vesting, benefit calculation, benefit availability and how to file a claim for benefits. …

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401k Participants Want Employer Help Saving for Retirement. No Kidding?

An article published early this year discussed a survey by State Street Global Advisors (SSgA) proudly boasted that 74% of participants in 401k plans want to better understand how their savings will pay off in retirement. This should come as no surprise. Most workers have little or no formal or informal education in investing. Thanks …

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How does an ESOP work? How does it work with a 401k plan?

An ESOP is an Employee Stock Ownership Plan. It is an ERISA-governed employee benefit plan that allows the employee to purchase shares of the employer’s stock on a tax deferred-basis. (You don’t pay taxes today but you will pay taxes when you take your money out of the plan.) ESOPs were common before the rise …

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