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Author: RecoveringFool Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75640  
Subject: Dividend check from 401k Date: 12/31/1997 10:17 AM
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For the first time ever, we received a dividend check from the ESOP fund from my husband's 401K. This fund is where the company match goes and I'm not happy that the money is not reinvested. I don't recall that we were offered any choice on this. Has anyone else had this experience ?(No company names but if you wanted to buy a US made rocket, you would probably buy it here)
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1007 of 75640
Subject: Re: Dividend check from 401k Date: 12/31/1997 12:12 PM
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RecoveringFool,

<<For the first time ever, we received a dividend check from the ESOP fund from my husband's 401K. This fund is where the company match goes and I'm not happy that the money is not reinvested. I don't recall that we were offered any choice on this. Has anyone else had this experience ?(No company names but if you wanted to buy a US made rocket, you would probably buy it here)>>

I don't have personal experience with ESOPs myself. I do know that an employer may deduct the amount of any dividend paid on stock held in an ESOP on the record date if the dividend is paid in cash directly or indirectly through the plan to the participant. Many times such payments are used to increase the amount otherwise allowable for contributions to a profit sharing plan and are reinvested. I guess you'll have to query your HR folks as to why you received the distribution instead of having that option. Quite frankly, I don't know.

Regards....Pixy

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1019 of 75640
Subject: Re: Dividend check from 401k Date: 12/31/1997 11:22 PM
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<<<For the first time ever, we received a dividend check from the ESOP fund from my husband's 401K. This fund is where the company match goes and I'm not happy that the money is not reinvested. I don't recall that we were offered any choice on this. Has anyone else had this experience ?(No company names but if you wanted to buy a US made rocket, you would probably buy it here)>>

I don't have personal experience with ESOPs myself. I do know that an employer may deduct the amount of any dividend paid on stock held in an ESOP on the record date if the dividend is paid in cash directly or indirectly through the plan to the participant. Many times such payments are used to increase the amount otherwise allowable for contributions to a profit sharing plan and are reinvested. I guess you'll have to query your HR folks as to why you received the distribution instead of having that option. Quite frankly, I don't know.>

I had an ESOP with a former employer. It was not a 401K, though, in the sense that I, as an employee, could not put any money in it. I assume my employer started it to get a tax break. When they started, they re-invested all the dividends. Later tax laws changed, and they sent us all the dividends once a year, even though they were paid in quarterly. The interest on the dividends between when the ESOP received them and when they were distributed were re-invested, however. Sometime around 1989 (I am not sure of the date), the tax laws changed again and my employer no longer made any contributions,so I got a check for a few hendred dollars each year (taxible) and the number of shares went up by a tiny fraction of one share.

The ESOP was 401k-enough so that I could roll over the ESOP (I had left that employer) into my (SEP-)IRA. I am not sure if I could have rolled over the stock or not. I know I had enough stock in that company already, so I had the ESOP administrator sell the stock and put the money into my (SEP-)IRA.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1024 of 75640
Subject: Re: Dividend check from 401k Date: 1/1/1998 11:49 AM
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JeanDavid,

<<The ESOP was 401k-enough so that I could roll over the ESOP (I had left that employer) into my (SEP-)IRA. I am not sure if I could have rolled over the stock or not. I know I had enough stock in that company already, so I had the ESOP administrator sell the stock and put the money into my (SEP-)IRA.>>

Too late now, of course, but you could have done so had you desired. You also could have taken the shares outside of the IRA, paid ordinary taxes on their value (no penalty), and a year or more later sold them and be assessed capital gains taxes instead of ordinary taxes one gets when cashing in the IRA.

Regards.....Pixy

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1028 of 75640
Subject: Re: Dividend check from 401k Date: 1/1/1998 1:44 PM
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<<<The ESOP was 401k-enough so that I could roll over the ESOP (I had left that employer) into my (SEP-)IRA. I am not sure if I could have rolled over the stock or not. I know I had enough stock in that company already, so I had the ESOP administrator sell the stock and put the money into my (SEP-)IRA.>>

Too late now, of course, but you could have done so had you desired. You also could have taken the shares outside of the IRA, paid ordinary taxes on their value (no penalty), and a year or more later sold them and be assessed capital gains taxes instead of ordinary taxes one gets when cashing in the IRA.>

True enough. I am too lazy to do the calculatons right now, but I have no earned income (technically I do, but it was under $100 in 1997) and wanted more money in a tax-deferred fund so the earnings would not be taxed until the end. At the time I assumed my taxes after age 59 1/2 would be less than they were before. Now, it seems that with Foolish investing methods, my retirement income tax bracket will be higher than my pre-retirement tax bracket, unless I start giving far more than 10% of my gross income to 501(c)(3) outfits.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1030 of 75640
Subject: Re: Dividend check from 401k Date: 1/1/1998 2:44 PM
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JeanDavid,

<<Now, it seems that with Foolish investing methods, my retirement income tax bracket will be higher than my pre-retirement tax bracket, unless I start giving far more than 10% of my gross income to 501(c)(3) outfits.>>

Gee, maybe I can help. It just so happens I've established Pixy's Foundation to Help Pixy Retire in Style and should be receiving my 501(c)(3) number from the IRS soon. Thus I'm perfectly willing to have you send 5% more to me so you can alleviate your problem. :-) When I get and cash your check, I'll send you the necessary number for your records as soon as the IRS provides it. And if they don't, you'll still have the satisfaction of knowing you helped deplete your income even if it did nothing for your taxes.

Best.....Pixy

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1031 of 75640
Subject: Re: Dividend check from 401k Date: 1/1/1998 4:02 PM
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<<<Now, it seems that with Foolish investing methods, my retirement income tax bracket will be higher than my pre-retirement tax bracket, unless I start giving far more than 10% of my gross income to 501(c)(3) outfits.>>

Gee, maybe I can help. It just so happens I've established Pixy's Foundation to Help Pixy Retire in Style and should be receiving my 501(c)(3) number from the IRS soon. Thus I'm perfectly willing to have you send 5% more to me so you can alleviate your problem. :-) When I get and cash your check, I'll send you the necessary number for your records as soon as the IRS provides it. And if they don't, you'll still have the satisfaction of knowing you helped deplete your income even if it did nothing for your taxes.>

I am so glad you are willing to do this favor for me. I though you just got a letter from the IRS stating that your employer-id was that of a 501(c)(3) corporation. I do not believe they give you another number besides. Not for the 2 501(c)(3)'s of which I have seen the IRS letter.

Of course, you WILL send me the letter each year that states that I received no goods or services in return for my contribution, won't you? I hope the record-keepinb burden will not be excessive for you.

Perhaps I should establish a similar tax exempt foundation to which you could contribute. That way, we could both fool the IRS. 8-) and ;-)

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1033 of 75640
Subject: Re: Dividend check from 401k Date: 1/1/1998 5:09 PM
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JeanDavid,

<<Of course, you WILL send me the letter each year that states that I received no goods or services in return for my contribution, won't you? I hope the record-keepinb burden will not be excessive for you.>>

ROTFL. And of course I'll send you a letter. No trouble at all, not a bother nor budensome.

Hppy New Year, too!

Best.....Pixy

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