The Tax Resources Blog

Archive for January, 2007

Tax Limit 401k

Question: I’ve got a two 401k investments from different organisation’s. Now I work for an ES-OP. Can I combine them?

For a follow up is there a time limit related to rolling over or reinvesting the 401k before tax contributions?.

Bonus question: What is your opinion about employee owned companies and its overall investment opportunities.

Thanks in advance for any contribution.couple of 401k

Answer: The fact that your company is employee owned doesn’t preclude them from offering a 401k that you can roll them into. They would also have an ESOP plan that only deals with the company stock. Two seperate plans…but part of your overall investment portfolio. Keep in mind that the plans might have different entry rules, vesting rules, and distribution rules.

If you take a cash distribution then you have 60 days to roll it into a plan. That just means 60 days from the time that the cash (check) is paid to you not from your termination date. There is no time limit with that part. I’ve got 401k’s with one of my previous employers that I left 5 years ago. I’ve got it 100% invested in company stock so I didn’t want to liquidate it.

As for ESOP’s? I think you have to be very careful that you don’t invest too much in them. Diversification of income from your investments is very important (Ask the folks at Enron). But, if management is sound then it’s not a bad thing. Generally ESOPS are a way for the owners of smaller companies to get out. Often times the value of the company is tied to them as individuals as well as the actual assets of the company. So to others it might be over-valued. But if they install an ESOP then the owner gets the cash up front but the actual ownership transitions to employees over the course of time.

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