Leaving job before lump sum 401k match

[shortstax]

Settle a debate between DH and me...

Background (PDQ):  I work for a small professional services firm (<30 employees.)  At the start of covid, they paused the 3% 401k match. Then in July this year, when revenue picked back up, they announced that they will reinstate it (with backpay) for all of 2021--but the catch is that they are going to wait and pay it "after the start of 2022."   This type of change to "typical" processes common, as we don't have much structure.

I accepted a new job offer and gave the 30 day they request of people in my role. Transition is going smoothly and it's been on good terms.

Here's my question--I figure I've worked 75% of the year, I should ask for what would be my match for the portion of the year I've worked.  Worst they can say is no, and there's no precedent.

DH says to let it go. The reason they shifted to this model is to hold it hostage for people to stay (his words, lol) and so they're likely to say no. Plus, he thinks it might burn a bridge to ask and the transition out has been rather positive so far (and we never know what the future holds.)

ETA - the firm often hires back former workers for short term projects. It could be a good, coast into retirement gig in the future (10-15 years...)

What says MM?

[ohgillian]

I don't see how asking would burn bridges as long as you're not hostile/entitled about it. They probably will say no, but I see no harm.

[kadams767]

I would ask what the policy is. My firm makes all of our 401k matching deposits in a lump sum in March for the prior year. We make the prorated employer contribution amount for all employees from the prior year even if they have left the firm prior to the date of deposit - we generally have to in order to stay in compliance with plan rules and regulations regarding safe harbor and highly compensated employee rules.

[Pilsy]

I truly don't see the harm in asking, provided you do so politely and with the understanding they're under no obligation to accommodate you.

[midwestmama]

You may want to check into what the plan document states with regard to the timing/frequency of when employer matches are deposited (e.g., every pay period, quarterly, annually, etc.), and then compare that with what the IRS states in terms of how long the company has to actually deposit that money into your account. If it's a qualified plan, it will have to follow IRS regulations. (I mention this because recently there was a payroll issue at my company (we had a change in payroll systems) and 401k employee and employer contributions were not deposited to 401k accounts on time, so my employer had to adjust the contributions to reflect gains/losses from the period of time that the funds were missing from accounts).

What I don't know is how the employer contribution pause plays into this as it relates to IRS regs. But I would think that once they were officially reinstated, the employer contributions would need to be deposited according to the timing indicated in the plan document.

Here is an IRS article on employer matching contributions: www.irs.gov/retirement-plans/401k-plan-fix-it-guide-employer-matching-contributions-were-not-made-to-all-appropriate-employees

I'm certainly not an attorney or 401k administrator expert (although many years ago I was the 401k administrator at the company I worked for at that time), but just something you may want to check into.

[brooke77]

I don’t see the harm in asking. Also, too late for this but in case this helps anyone else reading this, I have also asked a new employer to give me a sign-on bonus for leaving money with a current employer (bonus, 401K match, etc). It’s pretty standard in my industry if recruiting at year end.

[goldengirlz]

I also don’t see the harm in asking. Even though it’s a small company, it’s highly likely they’ve already thought about this and have formulated a policy. For example, they probably have fine print that says you have to have been employed by X date to qualify for the match and you have to have worked until at least Y date to get the payout. Are you the only person who’s joined or left the firm in the past nine months? If not, then there have been others in the same boat. I really don’t think it would burn a bridge to simply ask what the policies are.

[jlt19]

Oct 8, 2021 17:24:22 GMT -5 brooke77 said:

I don’t see the harm in asking. Also, too late for this but in case this helps anyone else reading this, I have also asked a new employer to give me a sign-on bonus for leaving money with a current employer (bonus, 401K match, etc). It’s pretty standard in my industry if recruiting at year end.

Ugh, I wish I would have seen this/thought of this before accepting my new job offer. My current role has an 8% bonus that pays out in March, but I will get $0 since I'm leaving prior to EOY. New job has a 17% bonus, but since I'm starting after October 1, will get $0 for 2021. So that sucks

[ECB]

Asking the simple question shouldn't burn bridges. And I doubt you'd be the first to ask!

[Pilsy]

shortstax, how'd it go??

[atarianna]

I am so curious about how this will go because I have a similar situation.

My (previous) employer would pay a lump sum 401k contribution equal to 3% of your salary but the catch is, they wouldn’t pay it until Oct of the NEXT year and would backdate it on paperwork to look like it was paid out almost a year earlier on 12/31/xxxx.

I quit my job in May 2021, therefore I worked all of 2020 and should be paid my 3% match. They just paid out the 3% but did not do mine. Since it’s the 2020 match and I was still employed on the “date of contribution” (12/31/20), I feel like I should have been paid this.

It’s under $1000 but to me it’s the principle since this company is awful and predatory, but at the same time I do not want to go out of my way to talk to them in any way.

[shortstax]

Oct 14, 2021 16:42:40 GMT -5 Pilsy said:

shortstax , how'd it go??

I'm asking today!  I expect a "we'll get back to you..." response but I'll update you all once I have one! 

[shortstax]

Oct 14, 2021 20:33:58 GMT -5 atarianna said:

I am so curious about how this will go because I have a similar situation.

My (previous) employer would pay a lump sum 401k contribution equal to 3% of your salary but the catch is, they wouldn’t pay it until Oct of the NEXT year and would backdate it on paperwork to look like it was paid out almost a year earlier on 12/31/xxxx.

I quit my job in May 2021, therefore I worked all of 2020 and should be paid my 3% match. They just paid out the 3% but did not do mine. Since it’s the 2020 match and I was still employed on the “date of contribution” (12/31/20), I feel like I should have been paid this.

It’s under $1000 but to me it’s the principle since this company is awful and predatory, but at the same time I do not want to go out of my way to talk to them in any way.

Ooooh, this is interesting.  I'm sorry to hear about your experience. That's bullshit.  

It's not a "benefit" if it's held hostage for a year!  I hope your new organization is a better fit for you (heart)

[shortstax]

I have a non-update update.

1. Employer came back and said it didn't matter because I haven't been there for 5 years, thus I'm not vested to keep the match anyways.
2. I sent back the plan details downloaded directly from our 401K provider that includes a chart for the vesting schedule--which shows I'm 25% vested by completing 2 years (I'm coming up on my 3rd anniversary.)

So, I'll update when I hear back. Although a few people have left this year, I think I'm honestly the first person to ask this...

[shortstax]

Final Update!

Based on the rules of our Safe Harbor 401k plan, I am qualified to receive the match for the portions of the year where I contributed (10 months) even though I am resigning before they pay it out in January.

Wooooooo! Thanks for being my sounding board and confirming that I should ask! *High 5*

[wise_rita]

That's crazy they didn't know their own rules and were about to write you off. Good outcome!

[shortstax]

Oct 27, 2021 3:04:05 GMT -5 wise_rita said:

That's crazy they didn't know their own rules and were about to write you off. Good outcome!

It's actually quite on-brand (hence the job search...)  

[bkseller13]

Oct 31, 2021 9:16:54 GMT -5 shortstax said:

Oct 27, 2021 3:04:05 GMT -5 wise_rita said:

That's crazy they didn't know their own rules and were about to write you off. Good outcome!

It's actually quite on-brand (hence the job search...)  

If you have more than $5k in your 401(k), you can leave it there basically indefinitely (so can leave it until the match is deposited).  If you want/have to move the funds sooner, you'll just get what's called a residual payout of the remainder due to you once it's deposited into the account.  Depending on the recordkeeper that holds the funds (i.e. Nationwide, Voya, John Hancock), the residual will be automatically distributed to you in the same manner requested by you for the bulk of your account provided it's within 180 days of your previous distribution request.  Otherwise, you'll have to complete a second distribution request.