Legal Question in Employment Law in California

Federal and/or State Laws regarding 401k pension plans?

I understand that 401k's are governed by the Dept. of Labor. I have a copy of my plan summary description. I am looking for the law regarding having two plans with one company. If transfered from a parent company to one of its subsidiary companies can the previous plan be held by the parent company? Seems unfair to have to start a new plan from scratch, not be able to roll over the previous plan into the new one, or be given the distribution notice to exercise control of the previos plan. 100% vested over 5k. Can you point me to the federal or state code that applies to this?


Asked on 12/17/99, 5:05 pm

1 Answer from Attorneys

Roger Renfro Renfro & Associates Law Corporation

Re: Federal and/or State Laws regarding 401k pension plans?

In general, a 401(k) plan is a special type of employee benefit plan. This type of employee benefit plan is often referred to as an employee pension benefit plan or retirement plan. An employee pension benefit plan either can be a "qualified" or "nonqualified" retirement plan. Any employee pension benefit plan that is also a qualified retirement plan generally must conform to two federal laws: The Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code ("Code"). Enforcement of the "ERISA" provisions (Title I of ERISA) that govern your 401(k) is the primary responsibility of the U.S. Department of Labor. Enforcement of the income tax portions of the Code that pertain to your 401(k) plan is the responsibility of the Internal Revenue Service (in fact, the term "401(k)" comes from section 401(k) of the Code). Generally, neither ERISA nor the Code would prohibit the parent corporation from extending participation and vesting service credit to employees who later transfer employment to one or more subsidiary corporations of the parent. Since, both ERISA and the Code require your 401(k) plan to be in writing, the answer to your question more likely than not will be found in one or both of the 401(k) plan documents, and probably not the law. Therefore, you should request from the Plan Administrator of both the existing and the new 401(k) plan, a copy of each 401(k) plan (and the Summary Plan Description of each as well). If you are unable to find the answer in these documents, you should put your QUESTION to and reqest a written response from the Plan Administrator.

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Answered on 12/20/99, 11:44 am


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