Can your company 401k be lost through bankruptcy of the company?

Answer 1

When you make a contribution to your 401k plan, your employer is required to have that money deposited into your account with the 401k custodian within a few weeks, From the IRS: "if your plan provides for salary reductions from employees' paychecks for contribution to the plan, then these contributions must be timely deposited. The law states that this must be accomplished as soon as it is reasonably possible to do so, but no later than the 15th business day of the month following the payday. If you can reasonably make the deposits in a shorter time frame, you need to make the deposits at that time." Once that is done, most plans ask you to select some investment choices for your money. Sometimes one of the options is Employer Stock. If you invest in your employer's stock, and the employer goes bankrupt then you could loose the amount you have invested in that stock. Depending on what investment options you have available, stock mutual funds, bond funds, money market accounts, the stock mutual fund may also own some employer stock. So if you are invested in that mutual fund, and also have some emplyer stock in your 401k, your risks are increasing. You are dependent on the employer for current income, you have some employer stock in your 401k account, and the stock mutual fund holds some of the employer stock. Add to that if your employer has a retirement plan for you your risks go up dramatically. Keep employer stock in your 401k at a minimum and you will likely do well.