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Employees at Bed Bath & Beyond who had invested in a "guaranteed interest account" as part of their 401(k) retirement plan experienced losses when the company filed for bankruptcy and terminated the plan. The losses were incurred because the plan's termination triggered the selling of underlying bond investments at a loss. Other investment options in the 401(k) plan were not affected. It is unclear how widespread guaranteed investment accounts are in company 401(k) plans. Participants in the plan have until October 13 to decide what to do with their balances, such as rolling them over to an individual retirement account or a different 401(k) plan. If participants do not make a decision, the money will automatically roll over to an Empower IRA in their name. It is advisable to actively make a choice in such situations, according to financial advisers.
To protect workplace retirement savings when a company is struggling, a federal law known as ERISA generally protects funds in a 401(k) plan, preventing them from being reached by creditors. However, it is important to ensure that retirement contributions are promptly deposited into the 401(k) plan. ERISA does not protect against market losses. Workers may experience losses if they have invested heavily in their employer's stock or if the employer made matching contributions in company stock. It is recommended to update contact information with the plan and seek information proactively to stay informed.
If there are concerns about a retirement plan or suspicions of improper handling of contributions, the Employee Benefits Security Administration, part of the Department of Labor, can be contacted for assistance. Groups like the Pension Rights Center and the Pension Action Center may provide free legal advice or referrals for individuals with concerns about their retirement plans. To obtain official information about a 401(k) plan, employees can request a copy of the summary plan description from the company or contact the Department of Labor. It is also important to read the prospectus or disclosure for any investment options being utilized.