401-K's, ESOP's and other Employee Benefit Plans

Most large companies, particularly those which are publicly-owned, have established employee benefit and pension plans. In some of these plans, the employer contributes 100% of the funds and the employee contributes no money. In recent years, most of these plans have become jointly funded by both the employers and the employees.

Typically, the trustees and administrators of these employee benefit plans are extremely responsible and invest the assets in the plans carefully and with the long-term interests of the employees and retirees foremost in their decision-making. Occasionally, there are "rotten eggs" who use the assets in the employee benefit plans for improper purposes such as happened during the past few years in companies such as Enron, Lucent and Fannie Mae. Sometimes, the assets are invested in a company's own stock to artificially manipulate stock trading prices or are simply imprudently over-concentrated without adequate consideration to prudent investment practices, such as diversification. Sometimes, investments are made in a company's own stock to enable management of that company to retain control of it, even when their own personal shareholdings are small. Sometimes, the trustees and administrators make very bad choices in the investment managers of the funds in the employee benefit plans. Sometimes, as in the case of several labor unions, the funds in the pension plans have been used for illegal purposes or looted by union officials.

Fortunately, both under federal and state laws, beneficiaries of employee benefit plans have the ability to sue the trustees or administrators of these plans, as well as the employers and others who have acted improperly or illegally. If you have any questions in connection with any of the issues raised above, please do not hesitate to contact me without obligation.

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