This Is Why I Keep Doing This (401k Happy Story)

I posted a template letter here for folks to use when requesting that their employer let them out of their 401k and actually take possession of their money last August 23rd and received the following email today:

Miss. Barnhardt:
Thank you so much for being “a voice crying in the wilderness”. Prior to your warnings I liquidated any and all assets held in the U.S. marketplace.  The only place I was unable to rescue my family’s money was my 401k.  When I called the brokerage I was informed of the few and limiting reasons my 401k plan allowed withdrawals; I fit none of them and in-service wasn’t one of them.  So I prayed to God and “let go” of the money emotionally by offering it to Him.
Then you posted the form letter which requested the plan change to allow in-service withdrawals.  I formatted that letter to fit my situation (company names, etc.) and sent it to my company’s finiancial officers.  This week I was informed that they had approved my request and the plan will be amended to allow withdrawals.  I am grateful to you for all of your writings and example.
My wife and I pray for you.  May God’s peace be with you all the days.
Hooray!  Yay!  If that’s the only good I ever do, then it has all been worth it.  Yay!!  Here is the template again with a couple of minor additions:

This was drafted and sent in by a reader, and I think it is a great template for anyone who wants to petition their employer to let them out of their 401k. I would recommend sending it via certified mail – let them know you’re dead serious, and try to get as many of your co-workers to do the same as you possibly can.




Dear Plan Sponsor,

I am writing to petition that the [LEGAL NAME OF THE PLAN] be amended to allow in-service withdrawals. As the plan stands now, the only way for actively employed participants to retrieve money is through a 401K loan or a Hardship Withdrawal. Neither of these two options allow participants full access to their assets. While I understand the purpose of the [LEGAL NAME OF THE PLAN] is to encourage savings for retirement, I fear that my assets are not entirely safe from fraud and theft and will not be available to me at retirement.

Numerous recent examples indicate the financial markets are rife with fraud, often at the peril of the individual investor. From what I gather of recent events I do not feel that my money is safe and currently have no recourse to move my assets from the [LEGAL NAME OF THE PLAN] to other investment vehicles.

Examples of recent fraud and theft in the financial industry:

MF Global

MF Global was a global commodities brokerage that declared bankruptcy in October of 2011. It was discovered that approximately $1.6 Billion in customer segregated funds were stolen and used to meet capital requirements in the weeks leading up to bankruptcy. To date, no one stands to face criminal charges.

Peregrine Financial Group (PFGBest)

In July of 2012 it was discovered that PFGBest stole approximately $220 million of customer funds. While claiming to have over $200 million in bank accounts, it turned out that PFGBest held only close to $5 million. The fraud appears to have spanned multiple decades despite the firm being regularly audited. The PFGBest government-backed auditors were not independently verifying the bank account balances and were instead using forged documentation provided not by the bank, but by the firm itself.

Sentinel Management Group (SMG)

In August of 2007, Sentinel Management filed for Chapter 11 bankruptcy protection. Investigators found that Sentinel leveraged over $500 million in customer funds as collateral for a loan from Bank of NY Mellon. This loan was used to fund in-house speculative trading. The National Futures Association (NFA) was the auditor of Sentinel, and has admitted to signing off on audits despite not fully understanding the books or the accounting method used. The NFA admits that it didn’t audit SMG properly.

However, what is most frightening is the recent ruling in the Sentinel Management Group case by the 7th Circuit Court of Appeals. The court ruled that the Bank of NY Mellon be placed first in line ahead of customers seeking the return of their money.

“That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted with actual intent to hinder, delay, or defraud its customers.”
U.S. Circuit Judge John D. Tinder

This ruling shows that not only does the Bank of NY Mellon move to the front of the line, but that using customer segregated funds as collateral is no longer considered a crime, and that co-mingling customer segregated funds with proprietary funds is no longer considered fraud. This ruling implies that customer assets held at a bank or trust are the legal property of any counterparty to loans the depository institution takes.

LIBOR Rate Manipulation

Last summer, Barclay’s Bank admitted that it tried to manipulate the LIBOR during the financial crisis in 2008. This rate is used as a reference for a range of financial products like car loans, adjustable-rate mortgages, student loans and credit cards. During the Barclay’s Bank inquiry it was discovered that many other banks may have also been manipulating LIBOR rates. This means that hundreds of millions of consumers, investors and businesses have been paying a manipulated interest rate.

Guaranteed Retirement Accounts (Nationalizing 401K Assets)

In 2010 the Employee Benefits Security Administration solicited feedback from plan administrators and other fiduciaries on the idea of whether or not they “could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.” This idea has also been called “Guaranteed Retirement Accounts” and been proposed by Vice President Biden and others in the current administration, with preliminary Senate hearings having been held on this plan in 2010. The core of the proposal is to force IRA and 401K plans to offer an annuity of sorts so participants are guaranteed a return on their assets in perpetuity. The preferred investment asset would likely be United States Treasury notes. As America stares down almost $16 Trillion of debt, conservatively projected to increase to $20 Trillion in 2016, forcing 401K and IRA assets into Treasury notes would be a tempting solution to shore up our nation’s dire financial situation.  In Europe, Poland just confiscated 50% of all private retirement accounts and pensions.


As you can see, despite stringent controls that were placed on the financial industry following the collapse of Enron (Sarbanes-Oxley) and the 2008 financial crisis (Dodd-Frank), rampant fraud not only still occurs, but has increased exponentially, and the regulators charged with protecting the investor are either complicit or negligent. When there is a collapse the individual investor cannot find justice through the courts as Dodd-Frank has imparted a statutory “super-priority” to all megabank counterparties that makes recovering collateral from any institution or fund holding derivatives in its portfolio impossible.

I do not feel that my 401K assets are safe at this point and strongly believe that in the event of a collapse of the trustee [NAME OF THE TRUST WHERE ASSETS ARE HELD] I will have no recourse to recoup my investment. At this point I do not have the ability to withdraw any of my assets held by the plan. Therefore I petition you to consider adding an in-service withdrawal option to the [LEGAL NAME OF THE PLAN] that would enable participants like me to withdraw our assets entirely.

Thank you for your time and consideration.

Bruce Jenner is a man. And furthermore I consider that islam must be destroyed.