Our coronavirus coverage is free for the first 24 hours. Find the latest information at Please consider subscribing or donating.

  1. Archive

Administrator must respond to 401(k) query in writing

Q. I have not had an accurate statement for my 401(k) plan since the transfer/conversion from one record-keeping company to another was supposed to have begun nearly a year ago. How can I get an accurate statement of how, where and when my retirement monies have been utilized?

Apparently my money is sitting in a money market account somewhere as the Standard & Poor's 500 Index has gone to record highs! Our newest record-keeping company just keeps saying, "We're working to transfer it over."

A. Try writing a letter to your plan administrator, says Greg Matthews, CEO of Avant Business Solutions in St. Petersburg. He says that under federal law, a participant in a pension plan has the right to receive a written response from the plan administrator to any written question. In fact, if you don't get your response within 30 days, the plan administrator owes you a $100 penalty for each day of delinquency.

"If the plan administrator does not respond, the participant can hire an attorney to collect this response and the penalty," Matthews said. '"It's one of the few areas where the courts can award attorney fees over benefit litigation."

In addition to asking what your funds are earning during this transition period, you might ask some questions about why the assets are being transferred and whether your administrative costs will go up as a result. Ask for details on how much the fees were/are and who collects them under the old and new arrangements.

It is normal for 401(k) funds to be in a money market account during a transition, but it is not normal for the transfer to take this long. The plan administrator is supposed to act in the interests of the participants, but unfortunately for you, there are no rules specifying how long a transfer can take.

Q. I will be taking a lump sum distribution from my retirement plan. I am confused about whether I should use five- or 10-year averaging to reduce my taxes. How can I know which is better?

A. Usually you have to do the math. However, I found a rule of thumb on this question in Ed Slott's IRA Advisor, a newsletter CPA Ed Slott publishes in Rockville Centre, N.Y. Assuming you are eligible for both, he says the best method varies with the size of the distribution. Ten-year averaging works best for distributions of less than $116,341 and those that fall between $136,507 and $318,833. Otherwise, the five-year method works best, he said.

If you wait until 2000 to take your distribution, you will not have that choice because 1999 is the last year for five-year averaging.

You apparently know that you are eligible to use these tax-saving methods, but some other readers may not be. If you were born before 1936, you may be eligible to use either method. If you were born just a little later but will be 59{ before you take the money, you may be eligible for five-year averaging. Other restrictions also apply, so be sure you know the rules and follow them.

Special tax breaks also may be available if a distribution includes employer stock or if it is based on participation in a plan before 1974. Publication 575 and Form 4972 contain the details.

If you will not need the money anytime soon, consider rolling over your entire distribution into an individual retirement account. The longer you can keep your money inside a tax-deferred account, the more valuable a rollover becomes. It probably is worthwhile to get professional advice if your distribution is large.

Q. Why would a company buy back its own stock?

A. Because officers and directors think the stock is undervalued. Announcement of a buyback often gives the stock price a boost, which makes shareholders happy. If the purchased shares are retired, then the company has fewer shares outstanding, which improves earnings per share and reduces the total being paid as dividends.

Online money map

Want to improve your money smarts? Drop by SmartMoney University ( to learn about investing, college planning, debt management or retirement planning.

_ Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731, or to by electronic mail.