Posted on 05/01/2014 12:25:33 PM PDT by TennesseeGirl
Questions about 401Ks.
His contributions are fully vested day one. Company contributions generally vest on a graded basis over a period of up to 6 years, 1/6 per year though the period could be shorter, of cliff vesting, 0% TO a max of 3 years, then it’s his. Applicable to each years match, not his total service. If that’s not the answer he got, I’d ask HR to explain why, perhaps you’re not in a traditional 401K, then go to the plan administrator and ask again to get the correct answer.
16 years is a long time to be vested. I would check with the company that holds the 401k.
How do you KNOW this ?
Snoot ;o)
Sounds like you need legal advice. If there's hanky-panky going on, you may be able to get the full proceeds (to roll into an IRA) and take a bite out of their hide.
Thank you for starting this thread. I’m at 14 years at my job, too. I fully expect them to change their rules, and must seek out external retirement options. I was thinking USAA..
Best of luck to you and your Husband on this.
Congrats on taking advantage of the 401K. The matching is gravy. Some cheesy companies do match but then set up a 25% vesting schedule on their extra contribution. Just confirm this is the case, express astonishment and then move on. You done what you could.
Addendum: If they tell you that you can keep the 401K in place and vest the contribution piece, look into buying an index fund for your stock purchase and leaving it in. It depends on the money amount that will be left on the table if you move the 401k. If it’s mice nuts move on and roll it into a self directed IRA, if its a substaintial dollar amount see if there is a low cost index(s) in your plan.
See if they are talking about the withdrawal penalty. Normally that and normal taxes ends up at around 50%. These taxes and penalties are not charged on a QUALIFIED rollover. I would talk to the 401(k) administrator for the specific plan.
To quote a contemporary patriot, “Like every inch of my glorious naked body.
“Once the feds regulate something, anything, they own it because the individual can’t defeat their legal and physical firepower. Ask rancher Bundy who looks over his shoulder constantly.
You need to take the written plan to somebody who knows. But if it’s written that way into the plan I’d say he’s stuck. (Who you’d take it to, I don’t know.) But you’d be amazed at what a letter from a lawyer would do. You’re right to be suspicious. They probably don’t have enough cash in the plan which violates federal law. If that’s the case you may be okay with a lawyer who knows the federal law. Even if you don’t have the legs for a lawsuit I’d have a lawyer threaten one. (He could threaten class action, which I’m certain a financially strained company would want to avoid.)
federal law is that you are 100% vested in no more than 10 years..
you are being handed a line of crap...
tell them to pay you off in the next 60 days or you will file a complaint ( you must have an ira to roll it into first)
Is the 401K in company stock? If not, it sounds like you’re getting some bad info.
You’ve been getting a lot of bad info on this thread — some good info, but too much bad.
I’m a pension actuary and I’ve spent my career helping employers design and administer defined benefit and defined contribution plans. 401K plans are defined contribution plans.
When employee and employer contributions are made they are put into a trust. Those contributions then are not affected by anything that happens to the employer. So, the future of the employer doesn’t affect the money that’s held in trust for your husband in any way.
An employer match of 50% is actually a pretty good plan.
It sounds like the plan vests 100% employer contributions that are in the trust, or plan, for 2 years. That’s a pretty good vesting schedule. That means that employer contributions that have been in the trust for more than 2 years are your husband’s. Employer contributions made during the last 2 years would be forfeited upon termination of employment.
It sounds like either the HR person was communicating incorrect info in some respects or your husband wasn’t understanding fully what was being communicated.
In any event, your husband should have been given a Summary Plan Description that explains the plan, and he has a right to a copy of the actual plan document if he requests it.
An attorney shouldn’t be necessary. That would almost certainly be a waste of money. I seriously doubt that the company or the HR person would try to cheat you. There are very serious potential federal penalties if they did.
Make certain he is investing in a 401K plan. Get a copy of the plan document, request it from the plan trustee. It will state the vesting period. it can be less, but most plans have a 7 year vesting period. I do not think that you can have a vesting period longer than 7 years.
When you take the money out, set up your rollover IRA to receive the rollover, have a trustee, make certain the distribution is a Direct Rollover to your new trustee. You do not want to take constructive receipt of those funds.
If you do take a premature or normal distribution, and take constructive receipt of the funds they will retain 20% withholding and you may end up treating the funds as income in the year received. If premature you will owe a 10% premature distribution penalty on that year’s taxes.
How does that work if the fedgov says you are to be 100% vested at six years? Is it a moving target? My understanding was that once you hit the 100% vesting target date, 100% of what was in the account was yours, both your contributions and the employer's, both past and future contributions.
I can’t see how they can remove money from his 401k, his name is on it, not theirs!
Thank you Cletus. That answer was well thought out and presented with nothing short of practical logic and common sense.
Snoot ;o)
each financial plan has its own stupid rules, you have to contact the Plan Administrator
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