I work for a non profit organization and we have a 403B plan, which is the non profit version of a 401K plan. My employer matches 4% and you get to keep the entire amount once you leave, as long as you have worked there for 4 years. Is this a good match or am I getting the low end of the stick here?
If they match dollar for dollar up to 4%, that's very good. But are you saying that if you take the match while you're there, then leave there before 4 years are up that they expect you to pay them back whatever they contributed?
That is what I am saying exactly. If you do not stay at least 4 years, you are not totally vested with them and they can take back a percentage of what they matched into your account. It is ridiculous.
How long have you been working for this employer? So you can collect your money accumulated from the 403B after 4 years?
Like said above, if you are getting matched penny by penny and dollar by dollar, then that is a fantastic deal.
That's not atypical. It's called vesting and most qualified plans will have some type of vesting component for employer contributions. Don't fret though, all of your contributions are entirely yours. So put in at least the full amount that will be matched, which sounds like it's 4%. If you put in 4%, the organization will put in 4% for a total of 8%. If you leave, you'll take all of your contributions plus any earnings, plus any vested contributions/earnings that the organization contributed. A majority of organizations match 3% or less of salary, so 4% ain't so bad. I wrote a blog about a similar topic not too long ago. http://peakwealthadvisors.com/2015/03/09/401k-check-up/
I've never encountered a situation with a client where they had to pay back money off a 401k rollover from a previous employer as far as I know. Does the former employer simply withhold the amount they're owed before cutting the check or authorizing the transfer of funds? Are there tax complications from this? I would imagine this would often involve selling off some assets within the account in order to pay back the former employer the balance owed?
There's no "pay back". The employee would just be entitled to rollover the portion vested as well as their own contributions. Any un-vested amounts would be forfeited. Rosyrain, would be smart to read the plan document that explains the nuances. The vesting could be over 4 years (25% per year), or could be on a cliff basis, which means you're 100% vested only after the 4th year. Difference between leaving with some employer contributions if you leaves before 4 years, and nothing.
Are they only forfeiting the principal amount of what the employer matched? Say for instance, if the employer contributed $12k over 3 years, and that $12k appreciated to $15k during that time. Are they only forfeiting $12k, or the entire $15k the $12k grew to?
Generally anything that comes from the employer contribution is subject to vesting. So if the 12k was 0% vested after 3 years, and the vest period is a 4 year cliff, then the employer contributions and related employer contribution earnings would be left on the table. If she was 75% vested after 3 years, then she'd take 75% of the total employer amount (contribution plus earnings) of $9,000, and leave 25% or $3,000 on the table. Depending on the plan, some of the forfeitures could go back to participants on a pro-rata basis, which is kinda cool if you're an existing participant.
