Q–I’m frustrated with my company 401(k) plan because my money is not invested until 30 to 90 days after it has been taken from my earnings. How long legally can the company hold my money? Secondly, I don’t get regular statements and want to know if the firm is required by law to send them. The way it is handling the 401(k) just doesn’t seem right. I’m considering dropping it.
A–First of all, it’s best to stick with your 401(k), so long as its investment choices are adequate and performing satisfactorily. Such a tax-deferred account is too good a deal to pass up.
While it would be much smarter on your employer’s part to go the extra mile to make your 401(k) the best possible program and thereby encourage greater contributions from workers, it doesn’t look like illegalities are involved.
Starting Feb. 3, 1997, the Department of Labor will require that your money go into the account 15 working days after the end of the month in which the contribution was made, according to David Hildebrandt, legal counsel with the Profit Sharing/401(k) Council of America.
The existing requirement is 90 days after the date of withholding, so your slowpoke employer isn’t in violation.
In answer to your second question, many conscientious employers do provide periodic statements, but not because of legal requirements.
“Legally, an employer must provide a benefits statement only when you file a written request for the information and is not required to answer your request more than once a year,” explained Hildebrandt.
Q–I follow your column faithfully. I’d like to know the best biotechnology stocks.
A–It’s an inherently risky area, but there are prime choices.
The most popular biotechnology stock among Wall Street analysts, according to I/B/E/S International, is Amgen Inc. It recently had 19 “strong buy” and eight “buy” recommendations from those covering it. Biogen N.V., with 11 strong buys and six buys, was second, followed by Centocor Inc. with eight strong buys and five buys.
In addition, Cephalon Inc. received seven strong buys and two buys, while Genetic Instrument Corp. garnered four strong buys and five buys. Chiron Corp. was next with four strong buys and four buys.
Q–I am aware of the positives of investing for the future with mutual funds. I’d like to know if PBHG Growth Fund is a good buy.
A–This flashy fund has had some remarkable returns, but it’s not the kind to add to your holdings unless you already own more conservative funds.
The $4.8 billion PBHG Growth Fund, whose three-year annualized return of 26 percent ranks in the upper 1 percent of all growth funds, has been run by respected manager Gary Pilgrim the past 11 years. It was up 19 percent over the past 12 months to rank in the top 6 percent of all growth funds.
Closed to new investment from May 1, 1995, until Jan. 2 of this year as it geared up to meet demands of a rapidly growing asset base, PBHG Growth is now confident it has the research staffing to get the job done. It has moved from being strictly a small-capitalization stock fund to one that emphasizes medium-cap stocks, a change that many investors may not realize.
“This fund is not a core investment, since it is at the fringe of many peoples’ risk tolerance,” cautioned Adam Wright, analyst with the Morningstar Mutual Funds investment advisory. “It has a very high average price/earnings ratio of 45 for its portfolio, concentrates heavily on specific sectors and has been volatile this year.”
It’s not a fund to pull in and out of. For example, it rose 52 percent in 1991, 47 percent in 1993 and 50 percent in 1995. But it declined 10 percent in 1990, gained 5 percent in 1994 and has tacked on just 3 percent thus far in 1996.
PBGH Growth Fund has nearly one-third of stock holdings in technology and one-third in services, with significant weightings in health and retail, too. Based in Wayne, Pa., this “no-load” (no initial sales charge) fund requires a $2,500 minimum initial investment.
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Andrew Leckey, who co-anchors the two-hour “Today’s Business” program each weekday morning on the CNBC cable television network, answers inquiries only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450.
