Employees can’t access 401(k)s

When Barbara Pardee, registrar at Boulder Creek Academy, learned she was losing her job, she put a call in to the company that administers her 401(k) plan to have her investment rolled over into an IRA account.

She heard some distressing news from a representative of ABM AMRO Asset Management company, which handles the 401(k) plan for Boulder Creek and other CEDU Educational Services schools.

“I cannot touch it,” she said.

The 401(k) funds apparently have been frozen because employee contributions for the last two months were not deposited into the 401(k) account. Employees say they’re being told that the federal Department of Labor may be investigating, which could mean it will be many months before they can cash out or move their investments.

Pardee has $3,200 invested. “It would be real handy right now,” she said.

Pardee and nearly 300 other CEDU employees in North Idaho didn’t get paid last week, and on March 25 they learned that CEDU and its parent company, The Brown Schools Inc., was filing for Chapter 7 bankruptcy. While most employees have filed for unemployment, Pardee is among a handful of employees who have stayed behind and are getting paid on a temporary basis under an emergency order of the bankruptcy court.

“I’m one of the fortunate ones,” said Pardee, who is 65 and able to collect Social Security.

All the employees are owed three weeks’ pay, which is held up in bankruptcy, and now they can’t get their hands on their 401(k) funds.

The Employee Benefits Security Administration investigates misuse of employee benefit funds. An agency spokesman said the agency will neither confirm nor deny whether an investigation is under way.

However, he did say that it is not normal for 401(k) funds to be frozen in the event of a bankruptcy unless there are questions about the handling of those funds.

Brown Schools CEO Peter Talbot acknowledged Friday that some money is missing from the fund.

“There is an outstanding balance on payments that should be made, and I made instructions to pay them,” he said. But now that everything is in Chapter 7 bankruptcy, those payments, along with all other payments to vendors, are being held up. The payments to the 401(k) plan have not been made for two months, he said.

“It’s the employees’ money,” he said. “They should have it.”

Talbot would not say how much money was missing from the account, but a source close to the company’s finances said it was $75,000.

Meanwhile, Pardee’s biggest concern now is what will happen with all the transcripts of former Boulder Creek Academy students. A school is supposed to make transcripts available for seven years after graduation, she said.

“If they close everything, where is this information going to be stored?” she asked. “It’s not like closing a business.”