401K Question & Answers

1/31/2003: Below is an E-mail from Erik A. Allstatt, Investment Specialist at Charles Schwab.
For those of us that have done an IN-KIND ROLLOVER with Charles Schwab, or haven't retired yet and need questions answered about our 401k with Charles Schwab, you can contact Erik at (800) 531-5110 Ext 32706, fax (317) 596-4444, email erik.allstatt@schwab.com.

From: Allstatt, Erik

Sent: Wednesday, January 29, 2003 3:27 PM

To: BranchYD, GreatLakesBusDevelopment(IND)

Subject: Charles Schwab & Co., Inc.

Dear Dan:

My name is Erik Allstatt and I am an Investment Specialist at Charles

Schwab. I wanted to make sure you were aware of the services you are

entitled to at Charles Schwab.

As an Investment Specialist, it is my job to assist you in finding the

appropriate type of management of your portfolio, as well as strengthen

your relationship with Schwab. Many clients appreciate having a contact

that they can speak with personally about specific and customized advice

that can help them achieve their long term goals.

I would like to speak with you directly, and to that end, it would be my

pleasure to set aside some time to talk with you. When we talk, we can

discuss your specific investment needs and the ways in which Charles

Schwab can help meet them. In addition, I can assist you with information

and resources, including workshops at the local office in Akron, designed

to help you make financial decisions that work for you.

Please email me or give me a call at 1-800-531-5110, extension 32706, at

your convenience. I look forward to speaking with you soon.

Best Regards,

Erik Allstatt

Investment Specialist

On December 4th, Mr. Britt Green came to Roosevelt Park Pavilion in Campbell, and explained some of our options concerning our 401K. Mr Britt Green is a Certified Financial Planner with UBS Pain Webber Inc. Mr Britt Green suggest you prepare yourself if you plan on moving your 401K when you officially retire. The first thing would be to call Bob Luce at 330-965-1913 and ask him to send you a distribution packet. Even though you may not be retired yet, it's a good idea to have the distribution packet ready for the day when you decide to pull your money from Schwab. I might point out, that by the end of this month Bob Luce may not be working for CMP, so it might be a good idea to do this as soon as possible. You don't know who might be taking over his duty, and if his replacement can be trustworthy.
If you have any questions concerning your investments, you can call Britt Greene at (330) 533-8010 and talk to him personally, or you can talk to one of his associates David Patrick (330) 533-8034 or Daniel Aulizia at (330) 533-8016. You can also stop in to see them at 3701 Boardman-Canfield Rd. in Canfield.

We have not yet received the termination notice from your employer. Once we receive the termination notice, distribution paperwork will be mailed and you will have these options

I've been questioned a lot about our 401K with Charles Schwab. I'll try and describe the situation and our options here, best I can. Also remember that the views and opinions of this page are strictly my own, and don't necessarily reflect the views and opinions of Local 3047. Also before making any financial investments, you should consult a licensed financial advisor (which I'm definitely not).

First thing we have to understand is the plan is still active and will remain active until CMP decides to terminate the plan. Basically, there's nothing we can do until they make the first move, and I bet it's not on their priority list right now.

Once they decide to terminate the plan, we have several options. I will start with the least favorable and move on to what I think is the best option:

Choice #1) Once the plan is terminated you have Charles Schwab send you the money and keep it for yourself, saving it or spending it as you wish, this is called an early distribution if you're not of age 59 1/2 yet. This will have consequences at tax time. Depending on the size of the distribution it will probably put you into the 27% bracket for Federal taxes, the State of Ohio will take another 3% to 5%, then the 10% penalty to top it off. You stand to loose about 40% to taxes! Not good.

Choice #2) Once the plan is terminated you have Charles Schwab send you your money. You then have 60days to roll it over into a qualified "Traditional IRA" (not to be confused with a "Roth IRA"). However, Charles Schwab will hold 20% for Federal Income Tax. If you do roll it over into an IRA within 60 days, you will be credited the 20% withheld from your 401K at tax time. This is risky, if you should get caught up into something and forget and let 60 days go by, you would be penalized as in first choice described above.

Choice #3) Once the plan is terminated you have Charles Schwab send your money directly to an IRA of your choice that you have setup at either your Bank or with your financial advisor. There would be no withholding nor any consequences at tax time. However with the Stock Market down right now, you would be forced to sell your shares probably at a loss (depending on which funds you hold and the direction of the market in the future).

Choice #4) Once the plan is terminated you have Charles Schwab convert your 401K plan to an IRA. This will be my choice. This option will allow you to keep everything as you always had it, same funds, no share to sell, no money to take out of our funds, which most are down right now and stand to loose money. Your former 401K is now converted to an IRA, but everything will remain pretty much the same. We will be given a local Charles Schwab advisor to talk to, and you can continue to move your money from fund to fund as usual with your computer or by phone or through your advisor. Definitely my choice. No tax consequences no loss for selling shares in a down market.