The Experts

Ask the Expert

By: Ted Benna Creator of the first 401(k) plan

December 5, 2002

This Week, Ted Tackles:
Can you recommend any games or Web sites that will help children understand basic financial concepts and the importance of saving? ı What information should be included in quarterly and annual 401(k) statements? ı Is it legal for my employer to not offer the age-50 catch-up contribution this year? ı I am divorced. Am I entitled to any of my ex-husband's 401(k) retirement benefit?

Q: Can you recommend any board games or Web sites that will help children understand basic financial concepts and the importance of saving?

TB: Great question. I suppose the board game Monopoly could provide a start. It does teach some money management concepts.

The American Savings Education Council, at www.asec.org, has some material directed toward children. Look in the "Savings Tools" section of its site.

But, I'm no expert in this field. So, I ask the readers of this column if you have any suggestions. I'd love to hear them. I'll print your suggestions in my Dec. 19 column, so those of you looking for holiday gift ideas will still have time to shop.

Q: What information should be included in quarterly and annual 401(k) statements? I currently receive statements that show:

the previous quarter closings -- with mutual funds stated in balances only, not share amounts,
contribution dates and dollar amounts, and
no beginning or ending share balances; simply a deduction (or addition ) of dollar amount for fund yield.

TB: Unfortunately, there aren't any standards regarding participant statements, amazing as that may seem.

Your employer seems to be using an outdated recordkeeping system known as a balance-forward system. This type of system reports all activity in dollars rather than shares. Most plans have changed to systems that track all activity by shares so participants get reporting similar to what they receive when they invest on their own.

What you are getting is legally adequate, just not up to today's technology.

Q: My employer told me last week that I can't make the $1,000 age-50 catch-up contribution to my 401(k) plan because its PeopleSoft software can't deduct the extra money from my paycheck. My employer said it will be able to accommodate the $2,000 401(k) catch-up contribution that will be allowed in 2003.

Is it legal for a company to say they will not offer this additional savings opportunity?

TB: Yes, it's legal. Amending the plan to allow a catch-up contribution is an option rather than a requirement. For a variety of reasons, many plans were not modified this year to allow the catch-up contribution.

I was surprised at the reason your employer gave you, though, because PeopleSoft is a major provider of human resources software. We contacted PeopleSoft about your question, and a spokesperson told us that "PeopleSoft software can accommodate the extra contribution."

Q: I am divorced, after 15 years of marriage. Am I entitled to part of my ex-husband's 401(k) retirement benefit? Does this need to be stipulated specifically in my divorce decree? What am I entitled to, if anything?

TB: Yes, you are entitled to 401(k) and other retirement benefits, but your rights to these benefits must be included in the divorce agreement.

It is up to the parties involved to decide how various assets will be split, including the retirement benefits. You need a good lawyer, who is familiar with these matters, to represent you. Also, you might want to consult a divorce planner, a special type of financial planner specializing in divorce settlements, to help you figure out which assets to ask for and how they will fit into your long-term financial plans.

I can't tell from your question whether the final divorce decree has been issued. If it has, you should see a lawyer and ask if you can reopen negotiations to get some or all of this asset.

Ted Benna, creator of the first 401(k) retirement savings plan, answers intriguing questions twice a month. With over 40 years of experience as an employee benefits consultant, Ted is a nationally recognized expert on benefits issues. He has authored three books, Helping Employees Achieve Retirement Income Security, Escaping the Coming Retirement Crisis, and Tips for Successfully Managing Your 401(k), and is President of the 401(k) Association. Ted is a frequent speaker at meetings of 401(k) plan sponsors and participants. His articles and comments have appeared in numerous publications, including The New York Times and The Wall Street Journal.

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The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.