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Archived News Release — Caution: Information may be out of date.
For more information call: 202/219-7316.
Secretary of Labor Robert B. Reich today proposed sharply
reducing the amount of time employers can hold workers' 401(k) savings as a
part of an effort by the Clinton administration to provide new protections for
the popular retirement plans.
"We've discovered that some employers are holding this
money for too long before they turn it over and we need to change that as soon
as possible. It's not their money - it belongs to the hard-working men and
women who have earned the money and who are putting it aside for retirement,"
Reich said.
Current Labor Department rules require an employer to turn
the money over to the investment plan as soon as possible, but permit it to be
held up to 90 days. The new rules Reich proposed today would eliminate that
90-day window and would replace it with the same requirement employers must
follow for paying Social Security taxes.
Those rules require Social Security taxes to be paid
quickly, with the exact amount of time based on the size of a company's
payroll. The time period ranges from as little as a day to less than a month
for the vast majority of employers.
Reich announced the proposed rule change as part of a
crackdown which began earlier this year on misuse of 401(k) money. More than
300 formal investigations are open and more than 100 have been closed. Since
the crackdown was announced two weeks ago, 35 new cases have been brought to
the Labor Department's attention, although formal investigations have not yet
begun.
In the past decade, there has been an explosion in the
number of 401(k) plans, which take their name from the section of the federal
tax code where they are spelled out. More than 22 million people were enrolled
in 140,000 such plans in 1992, the last year for which the department has full
statistics.
"Certainly, the vast majority of 401(k) plans are safe and
this program is still one of the best ways for people to build up their nest
egg and save for retirement," Reich said. "But there are some problems with
some companies and it is those companies we want to go after.
"We think these new rules will help solve the problem,"
Reich said. "Some employers have been holding the money for 90 days and they
shouldn't. In some cases, I think they were honestly confused, but in other
cases, they were simply treating the money as an interest-free loan for three
months. That's not right and this change should make American savers feel more
secure."
Archived News Release — Caution: Information may be out of date.
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