 TITLE: What Happens to Your 401(k) When Your Employer Goes Out of Business? CONTENT: If you invest in your company's 401(k) plan, you know that your pre-tax savings comes out of your paycheck each period and is invested in one or more investment vehicles, usually mutual funds. But you may wonder if your employer ever sees any of that money, other than any contribution it may provide. Very simply, your employer is not legally allowed to hold your 401(k) money. Under federal law, all 401(k) money must be held in a trust or in an insurance contract that's separate from your employer's assets. Therefore, neither your employer nor any of your employer's creditors can grab that 401(k) money.\nThat said, there are certain circumstances in which you may not receive all the funds you expected if your employer goes out of business.\n*   **The company goes out of business before funds make it into the plan.** Under the federal Employee Retirement Income Security Act (ERISA), an employer must deposit 401(k) contributions into the plan within 15 business days of the end of the month that your contribution was withheld. (The time limit is seven business days for employers with fewer than 100 participants.) If your employer didn't deposit your contribution before declaring bankruptcy, you could lose what would have been the most recent contribution, the National Association of Retirement Plan Participants (NARPP) says. The association recommends regularly checking your 401(k) statements to ensure your contributions are being deposited in a timely manner. Many operators of 401(k) plans let you check that information online.\n*   **Your employer contributions have a vesting schedule.** Matching or profit-sharing contributions made by your employer might be in jeopardy. Why? Your employer contributions may be on a vesting schedule. This means you might not have full access to those contributions until you've reached a certain benchmark, such as one year of employment. Therefore, if your employer goes out of business before its contributions to your 401(k) have fully vested, you might lose those funds.\n*   **You hold company stock in your 401(k).** If the stock becomes worthless when the company shuts down or is acquired by another company, the value of your stock goes with it. This is why it's important to ensure your 401(k) investments are diversified and not solely invested in your company's stock. END