Pennies from heaven: Former employer vested 401k match

[ProspectiveBum]

Back in 2014, DW worked a job at MC for a year before quitting to be a SAHM. She maxed out her 401k contributions in that year, but would have needed to stay a full 2 years for MC’s generous matching funds to vest. She’s left the 401k funds with that employer, rather than rolling them over to an IRA.

We got a letter the other day that the company changed their vesting policy, and that all matching funds will vest immediately, and that she’s now fully vested in the plan. I was sure this was a mistake and wouldn’t apply to former employees, but logging into her account, it does show as fully vested now.

Anyone ever heard of this happening? Is it possible that they made this change in error, and will claw it back? With growth, the matching funds are worth $25K, so certainly a nice surprise if it’s real.

 

[Souschef]

I had a situation where I got a notice they had sent me too much from my plan, and to send part of it back. My short answer was NO

 

[Ronstar]

It may due to her company switching to a safe harbor plan. We switched to a safe harbor and a lot of weird contributions happened IIRC

 

[ProspectiveBum]

It may due to her company switching to a safe harbor plan. We switched to a safe harbor and a lot of weird contributions happened IIRC

As far as I recall, this plan has been a safe-harbor plan all along. There was a line item on her 401k statement for the safe-harbor portion of the match. I don’t know much about safe-harbor plans, so maybe something else about it changed?

 

[cathy63]

That happened to me when my company switched from doing a 401k match and granting stock options to having an ESOP. Once they stopped the employer contributions, all their past contributions were fully vested immediately. They did this in the month before I retired, so it worked out to my advantage. I will eventually get a little bit from the ESOP as well since I was still on the payroll when it was established.

 

[ProspectiveBum]

That happened to me when my company switched from doing a 401k match and granting stock options to having an ESOP. Once they stopped the employer contributions, all their past contributions were fully vested immediately. They did this in the month before I retired, so it worked out to my advantage. I will eventually get a little bit from the ESOP as well since I was still on the payroll when it was established.

Interesting! It's possible that something like that happened, then, but since DW is no longer there, we're not sure of the specifics.

Mostly I was just wondering if this was a clerical error and whether they'll rescind the vesting since she's not currently an employee. I'd never heard of a change like this benefiting former employees.

 

[disneysteve]

This happened to me years ago when I did my internship and residency. At the hospital I trained, you had to work there for 5 years to be vested. I worked for 3. However the hospital got sold and apparently part of the sale terms were that all plan participants got fully vested.

 

[Retireby45ish]

In a related question that I am hoping someone can answer….DW is leaving a MC job 2 years into a place that has a 3 year minimum vest on 401k match. so she gets none of the funds they matched at 50%. Is it unheard of for her to ask her boss to keep these (have them vest early) in exchange for, say, staying on an extra 30 or 60 days as they’ll need to her to help in the transition upon her exit? It seems to me this cash strapped company might find it more palatable to agree to money that’s already in her account compared to an extra retention bonus. Bargaining chip? Or is there no wiggle room in these vesting rules?

 

[RetiredHappy]

In a related question that I am hoping someone can answer….DW is leaving a MC job 2 years into a place that has a 3 year minimum vest on 401k match. so she gets none of the funds they matched at 50%. Is it unheard of for her to ask her boss to keep these (have them vest early) in exchange for, say, staying on an extra 30 or 60 days as they’ll need to her to help in the transition upon her exit? It seems to me this cash strapped company might find it more palatable to agree to money that’s already in her account compared to an extra retention bonus. Bargaining chip? Or is there no wiggle room in these vesting rules?

I would be most surprised if there is wiggle room. It is a legal requirement which the company has established. Their hands are tied and cannot change the vesting rules for one without doing it for all employees.

 

[cathy63]

In a related question that I am hoping someone can answer….DW is leaving a MC job 2 years into a place that has a 3 year minimum vest on 401k match. so she gets none of the funds they matched at 50%. Is it unheard of for her to ask her boss to keep these (have them vest early) in exchange for, say, staying on an extra 30 or 60 days as they’ll need to her to help in the transition upon her exit? It seems to me this cash strapped company might find it more palatable to agree to money that’s already in her account compared to an extra retention bonus. Bargaining chip? Or is there no wiggle room in these vesting rules?

They can't do it unless it's allowed by the plan documents that were approved by the IRS when the plan was established.

 

[ProspectiveBum]

This happened to me years ago when I did my internship and residency. At the hospital I trained, you had to work there for 5 years to be vested. I worked for 3. However the hospital got sold and apparently part of the sale terms were that all plan participants got fully vested.

Just curious, were you still employed at the hospital when the sale and full vesting happened?

 

[Retireby45ish]

I would be most surprised if there is wiggle room. It is a legal requirement which the company has established. Their hands are tied and cannot change the vesting rules for one without doing it for all employees.

Makes sense. I wasn’t going to hold my breath, but might be best to just ask for a little $$ to stay on.
Also not holding breath for that.

 

[rothlev]

Back in 2014, DW worked a job at MC for a year before quitting to be a SAHM. She maxed out her 401k contributions in that year, but would have needed to stay a full 2 years for MC’s generous matching funds to vest. She’s left the 401k funds with that employer, rather than rolling them over to an IRA.

We got a letter the other day that the company changed their vesting policy, and that all matching funds will vest immediately, and that she’s now fully vested in the plan. I was sure this was a mistake and wouldn’t apply to former employees, but logging into her account, it does show as fully vested now.

Anyone ever heard of this happening? Is it possible that they made this change in error, and will claw it back? With growth, the matching funds are worth $25K, so certainly a nice surprise if it’s real.

why not role it over into an IRA , if you are concerned, i'd move the money. i think i'd move it anyway, but interesting as if you had moved it earlier she would not have received those funds.

 

[Surewhitey]

This happened to me years ago when I did my internship and residency. At the hospital I trained, you had to work there for 5 years to be vested. I worked for 3. However the hospital got sold and apparently part of the sale terms were that all plan participants got fully vested.

This is a similar thing with DW'S RSU plan. Otherwise, she has to wait for years 3,4&5, 33.3% each year.. Darn carrot!