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Regarding a 401K from a previous employer...
U.S. Dept of Labor ^ | August 13, 2010 | beaversmom

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?


TOPICS: Miscellaneous
KEYWORDS: 401k

1 posted on 08/13/2010 2:39:13 PM PDT by beaversmom
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To: beaversmom

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.


2 posted on 08/13/2010 2:45:20 PM PDT by Proud_USA_Republican ("The problem with socialism is that you eventually run out of other people's money.")
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To: Proud_USA_Republican

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.


3 posted on 08/13/2010 2:50:18 PM PDT by beaversmom
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To: beaversmom

By federal law....5 year vesting period. 20% per year. Go get ‘em....red


4 posted on 08/13/2010 2:50:24 PM PDT by rednek ("Light travels faster than sound. This is why some people appear bright until you hear them speak.")
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To: beaversmom

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.


5 posted on 08/13/2010 2:51:14 PM PDT by True_Kon
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To: beaversmom
It's the new company's way of gently urging you on by not matching contributions. It also wouldn't make sense. The buying company really wants you to move on. When you are not an employee of the company, they have no incentive to match new contributions and shouldn't be expected to. Matching contribution is a perk for employees of the company.

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.

6 posted on 08/13/2010 2:52:57 PM PDT by nmh (Intelligent people recognize Intelligent Design (God).)
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To: beaversmom

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........


7 posted on 08/13/2010 2:53:45 PM PDT by macquire
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To: beaversmom

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.


8 posted on 08/13/2010 2:54:05 PM PDT by VRWCmember
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To: rednek

She is wrong.


9 posted on 08/13/2010 2:54:26 PM PDT by macquire
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To: beaversmom
Just a couple of questions and clarifications:

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.

10 posted on 08/13/2010 2:54:55 PM PDT by Lou L (The Senate without a fillibuster is just a 100-member version of the House.)
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To: beaversmom

“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.


11 posted on 08/13/2010 2:55:13 PM PDT by SmartInsight (Bad officials are elected by good citizens who do not vote. ~ G. J. Nathan)
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To: beaversmom

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.


12 posted on 08/13/2010 2:55:55 PM PDT by Brookhaven (The next step for the Tea Party--The Conservative Hand--is available at Amazon.com)
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To: beaversmom

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.


13 posted on 08/13/2010 2:56:37 PM PDT by nmh (Intelligent people recognize Intelligent Design (God).)
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To: nmh

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.


14 posted on 08/13/2010 2:58:56 PM PDT by beaversmom
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To: nmh

Ideally they’d like you to MOVE the 401K to the next employer.


No, no, no. Do not move it to your next employer’s plan. Roll it over into a private plan with someone like Fidelity or Vanguard. The it’s 100% yours and you have 100% control of it. Exact same tax advantages as a 401K plan with an employer, but you are in charge of your own money.


15 posted on 08/13/2010 3:01:20 PM PDT by Brookhaven (The next step for the Tea Party--The Conservative Hand--is available at Amazon.com)
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To: Brookhaven

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.


16 posted on 08/13/2010 3:01:40 PM PDT by beaversmom
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To: beaversmom

OK.

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.


17 posted on 08/13/2010 3:05:11 PM PDT by Brookhaven (The next step for the Tea Party--The Conservative Hand--is available at Amazon.com)
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To: nmh
Ask H.R. to explain that in WRITING and see what your options are from there.

Thanks--that's also what the Kansas Office for the Dept of Labor suggested.

18 posted on 08/13/2010 3:05:51 PM PDT by beaversmom
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To: Brookhaven

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.


19 posted on 08/13/2010 3:08:14 PM PDT by beaversmom
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To: SmartInsight

It’s seems weird to me too, but who knows? We don’t live in a country that makes sense any more.


20 posted on 08/13/2010 3:11:12 PM PDT by beaversmom
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To: macquire
Yes, he was fully vested. The money was initially with Principal. We still have the statements that say he was 100% vested. He had the account for just over 5 years while he was with the company. The money then went to Great West. Now transferred to AUL.

Why have you ignored this 401k Money in the first place? that is the most important question.

You are correct, we should have done something sooner. I'm not sweating it too much as the company match wasn't a huge amount, but I didn't know that you could be vested and then unvested if that is in fact true. Have to find out more Monday. Just a heads up too for other people that may have an old account.

21 posted on 08/13/2010 3:20:10 PM PDT by beaversmom
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To: Lou L

Sorry Lou—I don’t think I was too clear in my initial post, but I really did try to be. See subsequent posts for (hopefully) clarification if you are so inclined.


22 posted on 08/13/2010 3:21:59 PM PDT by beaversmom
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To: beaversmom

Sounds to me like an error when the transfer was made. Somebody might have keyed in the wrong start/termination date at the new plan so they aren’t calculating his vesting correctly. Mistakes happen.

BUT, then again, the more I think about it..it is possible they could change the vesting.


23 posted on 08/13/2010 3:34:02 PM PDT by macquire
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To: macquire
Sounds to me like an error when the transfer was made. Somebody might have keyed in the wrong start/termination date at the new plan so they aren’t calculating his vesting correctly. Mistakes happen.

That would be nice. I was thinking, maybe hoping, that the information just wasn't given to AUL yet. The guy at AUL told my husband today that a new plan can change the vesting terms though. I don't know. The lady from the government office seemed to indicate the same thing. We'll have to just to hear what the H.R. person says on Monday and get the plan terms in writing like the other FReeper suggested. She was, of course, on vacation Thursday and today.

24 posted on 08/13/2010 3:41:55 PM PDT by beaversmom
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To: beaversmom

There should be no matching funds after he leaft, but if the company’s rules were that he was fully vested, then the money was his. They can’t take back what now belongs to him. Check with the previous administrator to see how much money he had and what the vesting was. I don’t know how long he worked for the company, but I have never seen it take more than 5 years to be fully vested. It’s usually a sliding scale: end of 1st year, vested 20%, end of second year, vested 40%, end of 3rd year, vested 60%, 4th-80%, and 5th-100%. Also, at ALL times, from the very first, all of your husband’s contributions were his. The only question is whether he was vested in the employer’s match.


25 posted on 08/13/2010 3:51:05 PM PDT by DallasDeb (USAFA '06 Mom)
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To: DallasDeb

He worked there 7 years and had the 401K for just over 5 years before he left. The money was initially with Principal. We have those statements that say he was 100% vested after the 5th year. Then the account was transferred to Great West. None of their statements indicate the vesting. Now it’s with AUL.


26 posted on 08/13/2010 3:56:29 PM PDT by beaversmom
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To: beaversmom

I’m glad it wasn’t a large sum. If he was vested, then the money is his, not theirs for the taking.


27 posted on 08/13/2010 3:59:06 PM PDT by DallasDeb (USAFA '06 Mom)
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To: macquire

They cannot take what has already been given to an employee if the employee is fully vested. The money is no longer the employer’s.


28 posted on 08/13/2010 4:01:47 PM PDT by DallasDeb (USAFA '06 Mom)
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To: beaversmom

It can change for future contributions, but contributions already made are grandfathered.


29 posted on 08/13/2010 4:02:43 PM PDT by DallasDeb (USAFA '06 Mom)
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To: DallasDeb

Thanks Deb—I do hope that’s the case and AUL just doesn’t have the information from the new company yet. I still don’t know if you can be vested, then have a plan change, and be unvested. It doesn’t seem like that would be legal, but nothing surprises me any more.


30 posted on 08/13/2010 4:02:59 PM PDT by beaversmom
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To: DallasDeb
It can change for future contributions, but contributions already made are grandfathered.

Now that makes sense.

31 posted on 08/13/2010 4:11:23 PM PDT by beaversmom
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To: beaversmom

Twelve years ago my husband left a job he had only had for a few years just out of college. He had about $20,000 in a 401k and because the company seemed to have it invested in a good plan, he left it there. A few years back before everything went south in the market, he had about $30,000 there— it was his money, they couldn’t touch it, just of course they were no longer making contributions. At that point we rolled it over into a Roth IRA. As soon as it was put into your husband’s account, it should have been his money— did you get monthly or quarterly statements with the balance like we did? Was it invested in a plan that took a big loss? Oh for the days when my Dad was a foreman in a factory and had not only a pension but a 401k with 100 percent matching. He was being “phased into” the new 401k system from a purely pension system.


32 posted on 08/13/2010 4:29:31 PM PDT by MacMattico
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To: Brookhaven

“No, no, no. Do not move it to your next employer’s plan. Roll it over into a private plan with someone like Fidelity or Vanguard. The it’s 100% yours and you have 100% control of it. Exact same tax advantages as a 401K plan with an employer, but you are in charge of your own money.”

True ... I didn’t specify where. You have ot be careful where you put it nexr.


33 posted on 08/13/2010 4:37:09 PM PDT by nmh (Intelligent people recognize Intelligent Design (God).)
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To: beaversmom

He should have rolled it into an IRA as soon as he left the company.


34 posted on 08/13/2010 4:38:04 PM PDT by ought-six ( Multiculturalism is national suicide, and political correctness is the cyanide capsule.)
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To: beaversmom
“Thanks—that's also what the Kansas Office for the Dept of Labor suggested. “

It's your best option and from there be careful where you put it. There are too many “plans” out there. I wouldn't want the opinion of the state. What you do next will be specific to your plan, plan rules and situation.

35 posted on 08/13/2010 4:39:59 PM PDT by nmh (Intelligent people recognize Intelligent Design (God).)
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To: beaversmom

There is no question that once you are vested...you are vested. It can’t be taken back.

My guess is that the person you were speaking with did not fully understand the question you were asking, and/or there may have been a record keeping error during the transition...it does happen from time to time.

My guess is the issue will be resolved without any major hassle.

If I am wrong, be sure to inform the new company and/or trustee that your next call is with the Department of Labor (DOL).


36 posted on 08/13/2010 4:42:44 PM PDT by Blaine Fabin
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To: beaversmom
Oops, I overlooked about the part of you already speaking with the DOL. Again I am certain that the person just mis-understood your question.

The plan can change the vesting rules going forward, but they can't go back and unvest what was vested. (Otherwise what good is a vesting schedule).

37 posted on 08/13/2010 4:50:26 PM PDT by Blaine Fabin
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To: beaversmom

You were given incorrect information.

If your husband was vested, he is still vested, regardless of any changes in the plan rules, trustees, or investment carriers.

It’s the law.

After HR confirms this for you next week, get the paperwork to roll it to an IRA, or to your husband’s new plan.


38 posted on 08/13/2010 5:58:02 PM PDT by grandpa jones (Obama must be exhausted, having to tote that giant brain of his around all the time.)
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To: Proud_USA_Republican
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.

You sure are.
She didn't say a word about matching funds.
And I believe that she did say he left the account balance with that old employer.

I happen to have the identical process going right now. I live in California.

First of all, 401(k) plans do not require matching funds by the employer. That is optional. Most of the contributions are employee pretax funds.

I left that firm 8 years ago, and left it there the entire time. The account grew about 100% in 8 years and I'm arranging to transfer it to consolidate retirement accounts this month.

Incidentally, the company reorganized; the name is somewhat different, but that had absolutely no effect on the administration of the account.

State and Federal regulations do not allow fiduciary game playing by 401(k) administrators.

39 posted on 08/13/2010 11:19:39 PM PDT by Publius6961 ("In 1964 the War on Poverty Began --- Poverty won.")
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To: grandpa jones; Blaine Fabin

Thanks g-pa and blaine—feeling better about this than I did Thursday and Friday. I think we are going to get it sorted out. I betcha the two AUL people were talking out their you know whats. The government person was just giving me general info—yes they can change their plans including vesting, but I don’t think she committed to it being okay retroactively.


40 posted on 08/14/2010 1:02:31 AM PDT by beaversmom
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