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© St. Petersburg Times, published July 7, 2002
Long delay in deposit of 401(k) funds raises red flag
Q. I recently became aware of a situation in which 401(k) contributions withheld from employees' pay were not credited to their accounts for more than 60 days. This seems to me to be excessive. It made me wonder if someone was delaying the payment to invest this for a short-term financial gain at the expense of the employee. Is this a unique situation?
A. Delays are not unusual, but the situation you describe appears to be illegal.
The law requires companies to transmit employee contributions to retirement plans as soon as they reasonably can be segregated from company funds. In no case can this be later than the 15th business day of the month following the month in which the contributions were withheld from paychecks or received by the employer.
If a company is not following the rules, the place to complain is the U.S. Department of Labor's Pension and Welfare Benefits Administration. Call toll-free 1-866-275-7922.
Q. I am saving for a down payment on a home. Is it true that I can take money out of my individual retirement account for this without any penalty?
A. Yes, it is -- within limits.
You can take a penalty-free withdrawal of up to $10,000 if you qualify as a "first-time home buyer." In the mysterious ways of the IRS, this does not mean that you actually have to be a first-time home buyer. You qualify if you have not had an ownership interest in a principal residence during the two-year period ending on the date that the new home is purchased.
You will have to pay regular income tax on your IRA withdrawal.
Q. Even though I take out more than the required minimum distribution every year, the value of my individual retirement account has held steady or increased. Now that the Dec. 31 principal value is being reported to the IRS annually, isn't the fact that the principal isn't declining going to attract attention? Can we still calculate our distribution based on the Dec. 31 value and just ignore interest earnings and capital gains as our broker suggests?
A. Yes. The minimum distribution is calculated on the Dec. 31 value. If the IRS checks your return, it will be looking at the relationship between the taxable distribution you report and the Dec. 31 value. As long as you take out at least the required amount each year, you don't have anything to worry about.
Q. Could you please tell me why Allmerica Securities Trust and General Public Utilities are not listed in the Times' New York Stock Exchange listings?
A. General Public Utilities no longer exists. It became GPU Inc. in 1996 and, last November, was acquired by FirstEnergy Corp.
Allmerica Securities Trust does exist, so if you don't see it, it is because its trading volume is low relative to other stocks on the New York Stock Exchange. Most newspapers do not have room to list every stock, so Associated Press computers are set to exclude stocks with the lowest trading volumes.
Q. Do foreign nationals who earn money in the United States pay U.S. taxes on their earnings? Do Americans earning money in foreign countries pay taxes in those countries?
A. As a general rule, earned income is taxed in the country where you earn it. In the United States, non-U.S. citizens are taxed the same as U.S. citizens on their earned income. The taxes a U.S. resident pays overseas are determined by the laws of the foreign country. On a U.S. income tax return, you are entitled to exclude up to $80,000 in foreign earned income.
Want to find out what those abbreviations in the stock listings stand for? Check out the Associated Press stock listings online. Along with a recent price, you will find the full name, the newspaper abbreviation and the ticker symbol for stocks on each of the major exchanges.
-- 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.