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Albert D. Kallal
I quit a job 2 years ago. The employee contribution in my 401K was not vested at that point. What happens to that money? It still shows up in my 401 account, but its not vested.
How long will that money remain in my account?
Where does it go after that?
I think that old employer will soon file for bankruptcy. what happens in that case?
I know I am not going to get that money, but am just curious to know its fate. As of today, I am free to play with it and invest in different instruments available under my 401K plan.
Saturday, August 04, 2007
"The employee contribution ..."
The employEE contribution, or the employER contribution was not vested?
I know nothing about 401K's, but it would seem to me that anything an employee contributes would stay in the plan. Employer contributions would vest over time but would go away if you quit before the vesting period.
If you are saying that the employER contributions are still showing in your plan then you are probably on thin ice moving those funds - the company has probably not done a good job of managing those funds, and if the company does go into bankruptcy then whomever manages the bankruptcy may go after those funds and you may end up having to pay them back. If it looks like you have done something to hide those funds you could be liable for penalties.
This is just my gut instinct and you know how reliable those are ...
employEE contribution vested immediately. +1 to those who say roll it to an IRA wherever you keep the rest of your fortune.
the unvested employER contribution is already gone.
Saturday, August 04, 2007
How long is the vesting period for the employER match?
Most are 3 years. One employer I had in the past 2 years had immediate vesting for the employER match (but they didn't match very much).
You need to read the plan documents to find out what goes on. Some will clawback any matches that haven't vested. Some will let the match vest if you leave the money in the plan until it vests. RTFM.
If you are able and willing to leave the money in the 401k program until it vests, then you can take the employER match with you when you roll it over to an IRA. Some plans require a minimum balance to keep it in their plan after you quit/separate. I've seen numbers like $1500 and $5k: any lower and they cut you a check immediately, and you better have an IRA to roll it into right away.
You *should* keep track of the 401k programs that you've put money into. I've rolled 2 over this year. The first one had the immediate vesting, and I left that employer last year. They charged $90 to write a check for the rollover, and they broke up the payments into employee contribution and employer match, and charged $90/check. Bastards. The other place had a 3 year vesting requirement for the employer match, which should have been complete as of Jan this year. I'm waiting to see how badly they screw me.
>I think that old employer will soon file for bankruptcy. what happens in that case?
There isn't a lot of case law in this area. Defined benefit pension plans (aka "traditional" pensions) have a lot of case law as well as regulations involved. Defined contribution pension plans (aka 401k, 403b and others) don't have that much. PBGC doesn't protect defined contribution plans, which is a large part of the reason why it is fashionable for businesses to ditch any remaining defined benefit plans. Many plans put far too much into the company stock, and folks who used to work for Enron lost everything.
Fact: Employee contributions are not subject to vesting, they belong to the employee. An employer who tries to behave otherwise is in very big trouble with the law.
Common Practice: Unvested employer contributions that are forfeited by severance are usually shared out among the remaining plan participant's accounts, sometimes designated as profit sharing.
Opinion: When you leave you should immediately roll your account over to one of the major investment houses in your own name. There is no kind of wonderful investment opportunity available only through the plan that is worth passing up the opportunity to take control of your own funds.
Monday, August 06, 2007
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