401k Freeze – Important Information

This information is from the link on the Heller Ehrman external website which did not work for some readers.  Some very good news – there are no termination fees to be assessed to the account holders.

Action Required: 401(k) Retirement Savings and Profit Sharing Plan Closing

Dear Plan Participant:

We made you aware earlier this month that the Heller Ehrman LLP 401(k) Plan Retirement Savings & Profit Sharing Plan was frozen to distributions. We are happy to inform you by this letter that the freeze will lift effective October 31, 2008. See “Your Next Steps” section below for how to request a distribution. You should arrange to take a distribution from the plan immediately. You must take a distribution from the plan by November 30, 2008.

You must decide by November 30, 2008, what to do with savings you have accumulated in the plan. This letter outlines the actions you can now take on your account, and provides important information about your distributions options.

Please review your choices carefully. You should also review the enclosed Special Tax Notice to determine the tax impact of the distribution option you choose. Then follow “Your Next Steps” as described near the end of this letter to implement the option you choose. Remember: If you have an outstanding loan, you must repay it in full to avoid taxes on the balance due. See the section of this letter entitled “Your Plan Loan.”

Until you request a distribution, you can continue to direct your investments in the normal way.

Your Distribution Options

Directly roll over your money to:

  • Another employer’s eligible plan. If the plan permits, you can roll over your plan balance to another employer’s eligible plan. This option will enable you to keep your money tax-deferred.
  • A traditional IRA. You can roll over pretax assets to a traditional IRA. This option will enable you to keep your money tax-deferred.
  • Take your savings in cash as a lump sum. This choice has significant tax implications. Distributions from pre-tax accounts are generally subject to ordinary income taxes and usually a 10% federal penalty tax if you are under age 59½. If you terminated employment with Heller Ehrman in the year you were age 55 or more, the 10% federal penalty tax does not apply to you. The IRS requires that 20% of your distribution be withheld for taxes, though your actual tax liability on the distribution may be more or less than 20%. You should consult your tax advisor regarding the tax implications of electing a lump sum distribution and to determine if you qualify for any of the exemptions from the 10% penalty tax.
  • If you do not make an election by November 30, 2008, your balance will be automatically rolled over to a Vanguard IRA® and invested in Vanguard Prime Money Market Fund. (Please review the enclosed fund fact sheet for more details on this fund.) After your Vanguard IRA is established, you can transfer the assets to an IRA at another financial institution or roll them over to another employer’s eligible plan (if the plan permits).

Plan termination note: Please be aware that the Plan has determined that no plan termination fees will be assessed against participant accounts.

Your Plan Loan

You must repay any outstanding loan balance you have with the plan by the date of your distribution or November 30, 2008, whichever comes first.

If you do not repay the loan by 4 p.m., Eastern time, on November 30, 2008, the unpaid balance will be reported to the IRS as a distribution. Consequently, the taxable portion of this distribution, if any, will be subject to ordinary income taxes and, if you are under age 59½, usually a 10% federal penalty tax. You cannot directly roll over an outstanding loan balance.

To pay off your outstanding loan, download the Loan Payoff form from the 401(k) Plan website (http://hewm.vanguard-education.com/ekit/) or the Heller Ehrman website (http://www.hellerehrman.com). Then call a Vanguard Participant Services associate at 800_523-1188 to determine the loan payoff amount and obtain further instructions. Vanguard will not accept personal checks for loan payoffs.

Additional Vanguard Services

Vanguard is much more than a retirement plan provider. We offer brokerage services, financial planning, and more. As you weigh your distribution options and investment decisions, you may want to consider using one or more of these services.

Your Next Steps

To request a direct rollover or a lump-sum distribution, simply log on to your account at Vanguard.com or call a Vanguard Participant Services associate at 800-523-1188. To request a final distribution online, you must be a registered user of Vanguard.com. To register for immediate online account access, you’ll need your plan number (093738). Note: You will not be able to request a distribution for seven days after you register for online account access.

Questions?

Call Vanguard Participant Services at 800-523-1188 Monday through Friday from 8:30 a.m. to 9 p.m., Eastern time.

Best wishes in your future endeavors.

Sincerely,

Vanguard

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12 Responses to “401k Freeze – Important Information”


  1. 1 dob 29 October 2008 at 4:49 pm

    Great news, thank you for keeping this clearinghouse active and brightening up the week!

  2. 2 Former Heller Assoc 29 October 2008 at 5:55 pm

    Any information health insurance for November?

  3. 3 Former Heller Assoc 29 October 2008 at 5:57 pm

    Info on health insurance from HEWM Web site:
    mportant Benefits Announcement 10/29/08
    Health Insurance

    Coverage provided under our group health insurance plans with Kaiser and CIGNA remains in effect, including COBRA coverage available through those plans. Over the past month we have engaged in extensive negotiations with CIGNA that were complicated by the fact that the firm owes CIGNA a substantial amount of money. Those negotiations resulted in an agreement — reached earlier this afternoon — whereby CIGNA consented to continue health insurance coverage in force for all plan participants but only through November 30, 2008. We do not expect CIGNA to agree to continued coverage on a group basis beyond that date. Termination of the CIGNA plan effective November 30, 2008 will result in termination of COBRA coverage for CIGNA plan participants effective on that date, as well as termination of coverage for the spouses/partners of retired shareholders insured through CIGNA effective on that date.

    If you are insured under the CIGNA group health insurance plan you will receive a separate formal communication from the firm announcing the termination of the CIGNA coverage. That communication will also outline health insurance options available to you, including options potentially available to you for converting your CIGNA coverage to an individual policy, as well as options available to you under HIPAA (the Health Insurance Portability and Accountability Act of 1996).

    The Kaiser group health insurance plan remains in force. We are not able to predict at this time whether or when that plan might terminate, but under the plan Kaiser is obligated to provide the firm with at least 30 days notice of its intent to terminate coverage. We will promptly advise all Kaiser participants in the event we receive such termination notice.

  4. 4 Heller Diaspora 29 October 2008 at 7:33 pm

    The official Heller Ehrman explanation posted today on the HE website about CIGNA coverage was written so poorly as to make little sense. What a surprise! For those HE employees terminated on October 10 and October 17, is our CIGNA coverage still in effect? Some fellow ex-employees have said yes, through Oct. 31, but I have received nothing official from HE management (or from CIGNA). Today’s HE explanation says a CIGNA coverage end-date of Nov. 30, but does that end-date apply to previously terminated employees, or just to the small corps of wind-down folks still employed? Can anyone shed light on the CIGNA details? And can HE management write more clearly in the future?

  5. 5 Anon2 29 October 2008 at 7:38 pm

    Heller Diaspora,

    I’m thinking Matt Larrabee must have written the blurb on the website, vague, incomplete, and ambiguous. But after I read it, I think it states there will be coverage for all employees until Nov. 30, but after that, nada. At least for Cigna. As for Kaiser, they are committing to nothing.

  6. 6 Need Insurance Advice 29 October 2008 at 9:29 pm

    I just applied for short term insurance coverage yesterday and apparently can’t pull the application. Does anyone have any insight as to how that affects eligibility for HIPAA? I was banking on the fact that Heller wouldn’t come through with COBRA and was apparently wrong. Should I take the COBRA as well as the short term coverage to keep myself eligible for HIPAA? Will that work? Any thoughts would be much appreciated.

  7. 7 Heller Diaspora 30 October 2008 at 12:03 am

    Further to my earlier posting, and the response by Anon2: If, indeed, all ex-employees who previously had CIGNA can now have their coverage continued until Nov. 30, 2008, how will we make our co-pay, given that we no longer are receiving paychecks? Or, will Heller Ehrman pick up the entire tab? If HE management reads this blog, it would be awfully nice of them to clarify.

  8. 8 Observer 30 October 2008 at 12:14 am

    Heller Diaspora, they are not going to pick up the co-pay amounts.

    COBRA: I was on COBRA, then HIPAA, once before. It is my understanding that you must exhaust all COBRA eligibility before you opt for HIPAA coverage. The good news is that for those eligible HIPAA coverage is guaranteed, i.e. you cannot be declined for prior health history/pre-existing medical conditions, etc. It costs considerably more than regular group coverage, but may be cheaper than what you can get an ordinary commercial individual policy for (if you can in fact qualify for such an individual policy — the younger and healthier the better for that).

    Info on HIPAA is available on the Cal Dept of Insurance web site, though you have to dig around in there to find it.

  9. 9 Observer 30 October 2008 at 12:51 am

    I re-read that badly written firm announcement.
    It does imply that those who had CIGNA coverage before termination still have it after termination, through November 30. By law, you would have to be given a notice that spells out your rights and options (COBRA, HIPAA, conversion policy, etc.) if your group coverage ended. If you got such a notice, your situation now would be different. But I think most of us did not already get any such ‘your group coverage has terminated’ notice, right?

    So, murky as it is, I think the firm’s statement is good news for now.

    Come November 30, the post-CIGNA option to go on COBRA would not be available. The absence of COBRA availability, however, would make most people eligible for the guaranteed acceptance for a HIPAA policy.

  10. 10 dob 30 October 2008 at 2:55 am

    I don’t know if I have anything to contribute beyond what Observer said, but the main issue with COBRA is that you can only extend coverage if the insurance plan is still in existence. Heller has said that CIGNA is unwilling to continue the plan after November 30, so if you were on CIGNA and are terminated you can opt for COBRA coverage under the CIGNA plan, but that coverage will terminate on November 30th since that plan will no longer exist.

    My understanding is that they are still negotiating with Kaiser to see if Kaiser will continue to offer that plan after November 30th, and to also provide a way for Heller employees that are on CIGNA to switch to Kaiser so they can continue coverage. I have no idea how they would do that for ex-employees that were covered by CIGNA when they were terminated.

    Does this match everyone else’s understanding?

  11. 11 Observer 30 October 2008 at 4:10 am

    To add to Dob’s points: If you were planning to go from Heller group CIGNA coverage to COBRA, you might want to wait until closer to Nov. 30 (or start the process now with a changeover date of Dec. 1).

    If you moved to COBRA right away, you would still get booted off that at Nov. 30, and be looking at going to HIPAA anyway.

    If you are going to another firm’s health plan, or your spouse’s group coverage, or a CIGNA conversion policy (etc.), obviously this discussion wouldn’t apply to you.

  12. 12 Sad in San Diego 30 October 2008 at 11:06 am

    Just got a memo from the Dissolution Committee which was forward by a friend. Paul Sugarman has asked that we send him our (former staff and associates) email addresses so that the committee can send out these reports.


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