401k Tax Gurus, Have a vesting Question....
 

Ok, long story (they always are), but here goes.

1993. I work full-time salaried for a guy, with a 50% match on a conventional 401k. Employment 'officially' lasts 11 months. I left to go do a 'project' for our government, he knew all about it, and in fact handed me to them with his reccommendation.

Years went by. I got a call from the employers' HR girl asking what I wanted to do with my 401k. They had been carrying me as 'employed' so I could stay in their investment group (which was doing very well). I replied at the time(by email from mainland China) that I couldn't deal with it at the moment, but could I just 'stay where I was' a while longer? She said, yes, no prob. I continued to get statements sparodically over the years, changing investment firms every so often, but all along, my contributions (vested at 100%, obviously) and the employer match eventually coming up to 100% as well.

Fast forward to last month. I get a letter from the company asking if I would 'do something' with my account. Very politely. I call, chat with the same boss. We catch up, he is just trying to clean up his files. The original bookeeper passed away suddenly in December, and the new, young kid is going over the books. He asked me to remind him why he was carrying me as 'employed'.

Long and short of it, I asked for a cash distribution of the 401k. Now the investment firm is saying with less than 5 years service, I am not entitled to the employer match. They are asking the employer if the match had already been forfeited in an earlier firm. My bet is that employer does not have records. I may.

While we are not talking a LOT of money here; ($6k) difference losing the match, what are my options? I only just now got the bad news, and I understand there is a 30 day time clock running for something once I have now made the distribution request.

Anybody run across this before?



Additional EDIT: Have been sitting here thinking about 'motives'... The original actual cash 'matched' by the employer was $3800ish. Has grown thru the years to $6300ish. If my access to the 'match' is denied, does he get this money back? Does he have any input into the descision, or is this an IRS thing?

You'd have to look at the actual 401(k) plan document for this employer's plan to see what the vesting period is for the matching funds. A five year vesting schedule is very common, and applied to your case with 11 months of service you technically might not be entitled to any of the matching $.

This employer screwed up when they kept you listed as employed after you left. Typically its possible to leave your money in an employer plan after you leave, but your status should not be reflected as actively employed...in your case this is probably why you saw your vested % in the matching $ grow even after you had left their employment.

Inside a 401(k) plan, there are a few things that can be done with forfeited matching contributions. Sometimes they are allocated across active participant's accounts, other times they can be used for future matching contributions (to reduce the amount of cash that the employer needs to fund the plan). These funds cannot be taken out of the 401(k) plan by the employer.

Thanks Jacob.

That is what appears to be emerging from the fog of emails.

Michael.

Another thing here. Everyone is looking at you as a normal employee, which you are not.

Flight crew are viewed differently in these things. You are viewed as being "employed" if you are "on duty" a certain amount of time.

Years ago I worked for the factory (forget which one!) and was laid off at 4 years 7 months time period. Was told that matching funds went out the window as none of us were vested for the full 5 years. A friend of mine in HR who had left the company a year ago hand walked me through this. It seems that years are not counted in our case, its "hours on duty" that counts. All of us where way over the minimum for this schedule.

I emailed the company back asking for the right things (forget what they were) and it turned out that I was vested. Along with another 32 pilots and flight attendents. Long story short is that we all got vested and the company was very pissed off at me for pointing out that they were breaking the law in trying to deny our matching funds. It cost them a lot of money but they owed it to us.

Joe A

Somewhere in all of this was something about 1100 hours a year (airbourne). That was cited as the 'break-even point to be considered 'employed'.

That works out to be a lot... back when I was 20-something, I did 1400 hours one year, and earned a citation from Marriott for over 250 nights in their chain, thank you very much. It almost killed me.

I am still looking into it.

Do not believe that its "airborne" but "on duty" for the company.

Thats what we used and the company said we were correct. It turned out that flight crew were vested for the year after about 6 months. We would go out for 5 days and home for 3 days, and they counted every hour that we were away from home as "being on duty" for the company. We sure as hell were not home!

I am still Platinum Premier with Marriott. They take real good care of me but then I really support the hotel when we are out on the road.