401K: why unvested?

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AQ
Posts: 885
Joined: Mon Feb 25, 2008 10:38 pm

401K: why unvested?

Post by AQ »

I ran into a kind of strange issue: my wife had a 401K from her former company. After she left the company (more than 7 years ago), we found that part of her 401K balance is still unvested. We were never able to figure out why. It has only a few hundreds dollars so we kind of let it go..

Now I ran into the same issue again. Recently I found part of my 401K with a former employer is also un-vested, even after I had worked enough years to quality for full vestment.

Anyway, the most puzzling question for me is: if part of our 401k balance is not vested, why didn't companies take unvested parts out when we left the companies? When do they plan to take unvested money back?

Anyone has similar experiences? Guess I just seek a plausible explanation or scenario.. I talked to our 401K administrators multiple times and everything they said is just repeat that that is company policy and nothing is wrong.. Really frustrating..
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Watty
Posts: 28860
Joined: Wed Oct 10, 2007 3:55 pm

Re: 401K: why unvested?

Post by Watty »

Anyway, the most puzzling question for me is: if part of our 401k balance is not vested, why didn't companies take unvested parts out when we left the companies? When do they plan to take unvested money back?

Anyone has similar experiences? Guess I just seek a plausible explanation or scenario..

I would suspect that there may be something in your plan that allows you to be rehired within a certain amount of time and not forfeit the unvested portion of your 401K.

I have seen people that were laid off be rehired a month or so later when a position opened up. To have them lose the unvested part of a 401k for such a short separation would be unreasonable so there are likely provisions for situations like this in the 401K plan.
amarone
Posts: 459
Joined: Sun Feb 15, 2009 5:39 am
Location: Atlanta

Re: 401K: why unvested?

Post by amarone »

AQ wrote:I ran into a kind of strange issue: my wife had a 401K from her former company. After she left the company (more than 7 years ago), we found that part of her 401K balance is still unvested. We were never able to figure out why. It has only a few hundreds dollars so we kind of let it go..

Now I ran into the same issue again. Recently I found part of my 401K with a former employer is also un-vested, even after I had worked enough years to quality for full vestment.

Anyway, the most puzzling question for me is: if part of our 401k balance is not vested, why didn't companies take unvested parts out when we left the companies? When do they plan to take unvested money back?

Anyone has similar experiences? Guess I just seek a plausible explanation or scenario.. I talked to our 401K administrators multiple times and everything they said is just repeat that that is company policy and nothing is wrong.. Really frustrating..
In our company 401(k) the unvested money has to stay in your account until you leave the plan. At that point, the money is forfeit and can be used either to offset company contributions (i.e. the company effectively gets it), or it will be distributed to the other participants. When we set up our plan, the company could choose between those options.

I don't know why the funds are not forfeited immediately, but Watty's suggestion makes sense.
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