Dear Dagen: How Long Can My Old Employer Take to Cough Up My 401(k) Money?

The law isn't very specific, but in practice, it can take months.
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I left my former employer July 1 and requested that my 401(k) be rolled over to a new IRA account Aug. 31. The broker who set up my IRA account said it would take 2 1/2 weeks for my 401(k) funds to be transferred. He now tells me it will take until mid-October. What is the maximum amount of time that the company has to transfer those funds? -- Rudy Klemet


A 401(k) plan isn't like your checking account. Getting money out of a plan can be a terribly time-consuming, irritating exercise that might take weeks, if not months.

Retirement plans are not required to distribute assets to you within a specific number of days, weeks or months. In fact, an employer can legally hold on to that money until your retirement.

In practice, however, most companies will distribute retirement-plan assets to employees upon their departure. "Nearly all employers want to get rid of the money," says David Wray, president of the

Profit Sharing/401(k) Council


The plan sponsor usually covers the administration costs of any accounts in the 401(k) plan. By distributing retirement assets to employees who have left, the company reduces these costs. Plus, the company "doesn't want to keep track of you for the next 25 years," Wray adds.

The time it will take for your plan to release your money depends on two factors: the terms of the plan and how often the plan is valued.

A document called the "summary plan description" should give you an outline of when payouts are available and the time frame, says Debra Levine, assistant vice president of retirement plans at

Pioneer Investments

in Boston.

However, the language in this document probably won't be very specific. It might say something like: "Distributions will be made as soon as administratively practical," or "Payouts will be made following 60 days after the plan year in which the employees leaves the company."

A more telling factor is how often assets in the plan are priced. You'll get your money sooner from a plan that's valued more frequently.

These days, most plans are valued on a daily basis. For a daily valued plan, it should generally take a few days to a few weeks to receive your distribution, says Rich Koski, a principal at

Buck Consultants

, a benefits consulting firm in New York.

Plans that are valued monthly or quarterly will take a lot more time to distribute your assets. It might take one to two months for a plan that's valued monthly. For those with quarterly valuations, you could end up waiting much longer.

If you'd left your job, say, at the beginning of January and your plan is valued at the end of the quarter (i.e., March 31), you might have to wait until May or June to receive your lump-sum distribution because of processing time and paperwork.

Even worse, "some profit-sharing plans are only valued annually," adds Pioneer's Levine.

A delay of a few months is within normal slippage. "Weeks can seem like eons," Koski says. But "it's hard to get legal damages until it's really outrageous."

Rather than asking your broker where your money is, you should start by talking to human resources or benefits administration at your former employer. It is your former company's responsibility to distribute that money, not your broker's job to go get it.

You should make sure that you filled out all the necessary distribution paperwork with your former employer and signed everything that needed to be signed. For example, you may have to get your spouse's signature on the paperwork as well, because he or she is your beneficiary.

Assuming all those forms were filled out properly, the company will probably call the plan's third-party administrator, the party that handles all the paperwork and processing, to see if the proper paperwork has been received. "That's where the answer

to any delays usually lies," Levine says.

You can always scream at your former employer if something has gone awry. What have you got to lose? You don't work there anymore.

For more on the rules that govern 401(k) plan rollovers and distributions, read the following

Tax Forum.

If you think your company is handling your 401(k) improperly, you can contact the

Labor Department's Pension and Welfare Benefits Administration

, which oversees retirement plans.

This division's office of technical assistance and inquiries can be reached through one of 15 field offices around the country. You can locate one of these offices on the Labor Department's Web site at

Or you can send a letter to the following address:

U.S. Department of Labor
Pension and Welfare Benefits Administration
Office of Technical Assistance and Inquiries
Room N-5625
200 Constitution Ave. NW
Washington, D.C. 20210

Send your questions and comments, along with your full name, to

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.