401k Forfeiture

[Slug]

So, last week an additional $48.01 showed up in my 401k account under the category of company match. My employer is about as generous as Uncle Scrooge. They have suspended all matching until the end of the year so I was curious about this deposit. Upon further review, it listed a payroll date of 12/31/09 (i.e. 11 mths ago). I dug further and found out that this money is actually money that has been forfeited by other employs who left the company in 2009 without being fully vested. The money reverted back to the Plan. Apparently in the plan documents there must be some clause that diverts those funds to everyone else in the plan.

Has anyone else benefited from this or know more about it?

My plan now is to send all headhunter calls to VP level folks who I know are not fully vested in their 401k. Hopefully I can generate some more retirement funds for me

[jpg7n16]

That's pretty normal IMO.

When an employee leaves without having the balance of employer given funds fully vested, that money has to go somewhere. (and since they weren't vested, they were probably only a few years, meaning not a lot of time to build a large balance)

Since the money has to go somewhere, employers will either use the funds to reduce employer contributions, or spread it out to all existing accounts. Looks like your plan is the latter.

[MonkeyMama]

I mostly work with small employers (5-50 employees) and I have never heard of the forfeitures reverting to the rank and file employees. That's pretty sweet. (Of course, the way the plans are set up is so the employees get a small token and all the principals get to put away the max - just the profile of my clients).

It's probably fairly common - what you experienced. The forfeitures are always there, and have to go somewhere - indeed.

[dmontngrey]

Wow! My company just uses it to pay towards company match. I know this because I administer the 401k. I've never heard of it being given to the employees. That's rather generous of them.

Good luck with your headhunter calls!

[jIM_Ohio]

If company has lots of highly compensated employees, and not many lower level contributors, distributing non vested funds this way might help the safe harbor and other legal provisions of the 401k which help the highly compensated employees defer taxes.

[Slug]

If company has lots of highly compensated employees, and not many lower level contributors, distributing non vested funds this way might help the safe harbor and other legal provisions of the 401k which help the highly compensated employees defer taxes.

Very prescient. This just happened at my company. My boss just had $4k of her 2009 contributions returned to her because we failed that test. Interestingly, even though I also fall in the highly paid cohort and maxed my 401k out in 2009, I did not receive notice or funds related to this situation. I'm wondering if it's because I wasn't included among the test subjects, but that would be incredibly unfair. It's very strange but one more thing to be thankful about this Thanksgiving I guess.