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[EarthNSky <erthnsky AT bellsouth.net>]

So what happens if a business goes under?
For the sake of argument, the business is mid sized, less than 50 
employees.  All 50 would have to be paid within a few weeks, no?

Clansgian AT wmconnect.com wrote:
> > > Why is it, if you have a 401K through your employer, that you have to 
> > quit your job in order to cash out?  Why?
>
> The simple answer (non answer, really) is that federal law mandates it.
>
> But the reason is because your employer doesn't actually have the money.  The 
> money is theoretical, just like 'money' in the stock market.  When you work a 
> job you have the option of keeping all your money and spending it as you 
> choose, or buying 401K lottery tickets with part of it.
>
> Just like of 50% of the people who had, say, ITT stock put in an order to 
> sell that stock on Monday morning (cash it out, as it were), the other 50% of the 
> people who own that stock would get nearly nothing.  Actually it would only 
> take ore like 5% rather than 50%.  It's because the "money" in that stock 
> doesn't really exist, even as money, which itself doesn't really exist in any real 
> sense of the word.
>
> So if an employer sponsors a 401K and suddenly half the employees decided to 
> "cash out", there isn't any actual money to pay them.  All the "money" (nod, 
> nudge, wink) is actually a hope that the stocks that make up the 401K will be 
> doing well when you do cash out.
>
> So limiting withdrawals and dissolutions to only employees who are leaving 
> the company and the plan, the employer is not faced with the need for coming up 
> with a large amount of cash (which it doesn't have) to pay off the 
> contributors should a lot of them just want or need the money.
>
> James
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