Skip to comments.Regarding a 401K from a previous employer...
Posted on 08/13/2010 2:39:11 PM PDT by beaversmom
My husband had a 401K with a previous employer. We let it sit with the old company's administrator. It wasn't losing or making any money. Checking on the 401K administrator's website the other day, I see, to my surprise, the balance is zero in his account. It had been moved to a new company as the previous employer had been bought. Calling the new administrator for one question, we find out from them that my husband is no longer vested in the company match as he had once been. Speaking today with www.dol.gov/ebsa in Kansas it seems that the new company doesn't have to honour the old plan rules on vesting. We have to wait to call the Human Resources person at the new company on Monday to find out for sure. Anyone else have any experience with this?
Unless he was receiving deffered compensation from the previous employer as part of a layoff/early retirement/retirement agreement, why would their be an expectation that the 401K still would have matching funds being deposited? If he’s not working for this company anymore, why would you be receiving any type of deposit?
Confused on this.
He wasn’t still receiving the company match after he left the company, but the money is still listed separately in the account:
$10 from employee
$ 5 from employer
We are being told that even though he left the company fully vested, that he only gets the $10 and not the $5 if that is, in fact, in the new plan’s rules. It’s all new to me.
By federal law....5 year vesting period. 20% per year. Go get ‘em....red
Each company has different matching rules. There is no requirement from rules point of view to even match. Depending on the economy and company’s own performance, some company’s match, some just decide they are not going to match for a while untill they are healthy again from financial point of view.
He is actually lucky that he got enrolled in new companies’ plan without taking any action. They could have cashed out and hit you with HUGE taxes (double) and send you the check.
Often when a company buys another company these plans change hands too. It's not unusual. Your money can still grow if you watch the investment mix. Ideally they'd like you to MOVE the 401K to the next employer.
Since you never took a distribution to roll it over to an IRA I am betting he was never fully vested in the first place. If I have $1,000 in my 401k and $100 of it is match but I have only been there for 3 years and vesting is 5 years, I won’t see the 40% of the $100 disappear from my account until I roll it out or get forced out.
Why have you ignored this 401k Money in the first place? that is the most important question. People need to wake up and pay attention to their investments........
Too late to help you, but about any investment counselor worth anything will tell you that if you leave an employer you should take 100% of your 401k balance and roll it over either into an IRA or into a qualified 401k plan with the new employer.
She is wrong.
My husband had a 401K with a previous employer. We let it sit with the old company's administrator. It wasn't losing or making any money.
I'd be careful with this assumption. Even if it wasn't losing money, you were very likely still being charged fees for operating expenses.
Checking on the 401K administrator's website the other day, I see, to my surprise, the balance is zero in his account.
Yikes! That would be a surprise!
It had been moved to a new company as the previous employer had been bought. Calling the new administrator for one question, we find out from them that my husband is no longer vested in the company match as he had once been.
If he's no longer working for them, vesting for company matches shouldn't be a problem, as he's not still contributing to the 401(k). Matches are typically only given to employers making active contributions.
Speaking today with www.dol.gov/ebsa in Kansas it seems that the new company doesn't have to honour the old plan rules on vesting. We have to wait to call the Human Resources person at the new company on Monday to find out for sure. Anyone else have any experience with this?
Usually, if a balance in a 401(k) is above $5000 or so, an employee can leave it in the plan indefinitely, per current rules. It's typically recommended that people roll their old 401(k)s into an IRA, as you never know what policy changes might occur.
Regardless of whether you roll the balance over, or keep it in the plan, you don't continue to contribute, and you don't continue to get employer matches.
“It had been moved to a new company as the previous employer had been bought.”
They should have notified you about this — there is something strange going on. If he was fully vested in the contribuions of the previous company, the new company cannot take this away from him.
As you planned, talk to HR and also call back the new plan administrators.
I sure hope this was an example from the web site and not you.
1. When you leave a company, rollover the money from the company 401K plan to your private 401K plan immediatly (first thing, right off the bat, the day after you leave the company). As long as it sits in a corporate 401K plan, they have control over your money (not you).
2. Did the new company remove some of the money from the plan that the old company had included as a “match” to your contribution? If so, then all I can say is see #1 above.
Otherwise, what the heck are you talking about? You quit the company. No company will match your contributions to a 401K plan made after you quit the company.
If your husband was vested before he changed companies, I don’t believe the new company can deny him that even if the money is with a different financial vendor. That’s something H.R. would have to answer. I don’t know if a new fund has to grandfather the old fund vesting rules. The new fund may have different vesting rules that make hubby ineligible with the new financial fund holder. Ask H.R. to explain that in WRITING and see what your options are from there.
We weren’t expecting or getting any matching of contributions. We could no longer contribute to the account after he left the company. The money just grew a little over the years because it was in a fixed account. Just basically sitting there. What we are being told now is we have $15 dollars in the account—$10 from my husband $5 from the old company. My husband was fully vested when he left the company. Now that the company has changed hands, we can only get the $10—not the full $15. Just trying to find out if anyone else has had this experience or heard about it.
Ideally they’d like you to MOVE the 401K to the next employer.
I’m not talking about the matching of contributions after leaving the company. We are being told we are not entitled to the matched contributions that were made while he was with the company even though he was fully vested while he was with that company.
I don’t know what the laws actually say about this (they are pretty quirky), but I do know that if you had gotten the money out of their hands when you quit and into your own hands all of this would have been moot.
Sorry to hear someone is trying to take advantage of you, but that’s why you’ve got to watch out for yourself.
Thanks--that's also what the Kansas Office for the Dept of Labor suggested.
Thanks—live and learn kind of thing. It’s not a huge amount in the scheme of things, but still, it seemed to be his money at one point in time and now it may not be.
It’s seems weird to me too, but who knows? We don’t live in a country that makes sense any more.
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