Vesting of 401K matching

[inddey]

What is the name of your state (only U.S. law)? Iowa

"This question is regarding employer 401K matching plan. My job offer letter had a list of all the benefits that I will be eligible, once I accepted the job offer. One of the listed benefit was employer contributing/ matching 6 % of base pay in the 401K plan. In the employment offer there was no mention about any vesting period.

When I resigned after working for 2.5 Years, I was told that vesting period for the employer maching part of the 401K plan is 3 years.

This 401K plan was maintained with Fidelity Investment. Recently I found out that my ex-employer has taken away their contribution from my 401K account.

My question is that, do I have any legal recourse to this action?
I will appreciate any comments/recommendation.

Thank you in advance.


Ni****

 

[cbg]

Almost certainly not. Money that YOU put into a 401k is always immediately vested; money your employer puts in rarely is.

The deciding factor is NOT your offer letter but the plan document. There is absolutely no requirement that your offer letter list all of the details of a plan. The plan document, which you had access to (and still do if you have not yet taken a distribution of your contributions) would show the details. If the plan document says that employer contributions have a 3 year vesting period, then it does. Period. End of statement. No exceptions.

 

[swalsh411]

And you never reviewed the plan document?

 

[Beth3]

An offer letter isn't going to contain much information regarding employee benefits - not much more than just the basic eligibility info. When you joined the 401(k) Plan, I expect at the very least you received a booklet describing the the Plan particulars and perhaps a Plan Document. Did you look at it?

Most 401(k) Plans vest based on one of two required schedules for the employer contributions - a 3 year "cliff" (100% vested after 3 years) or 20% per year with full vesting at six years. Looks like your employer has cliff vesting.

No, you have no legal recourse. It's not your employer's fault you didn't pay attention to the Plan information.

 

[lmahuteau3]

401 Vesting Period Hidden from Candidates

An offer letter isn't going to contain much information regarding employee benefits - not much more than just the basic eligibility info. When you joined the 401(k) Plan, I expect at the very least you received a booklet describing the the Plan particulars and perhaps a Plan Document. Did you look at it?

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I would like to rebound on this thread and share my experience to see if one of you could provide additional details & feedback. Thank you very much your experience on this as I must say I have been looking for a lot of guidance and it has been extremely hard. I have experienced a very similar situation. I have joined a company which has always clearly stated an employer contribution (7% in this case) in my offer letter. Prior to working for this company, I worked for two companies which DID NOT have a vesting period. At the time of recruitment, I had received a booklet with a summary of the benefits along with the offer letter and read it all in detail before accepting the job. None of the documents or exchanged I have had with the HR during the recruiting process stated ANY vesting period.

It's only 3 months into the job, during a 401k presentation session that the whole truth came out from the financial advisor. Then, I asked the HR team to point out to me where this was referenced to me during the hiring process. They couldn't point out to me where it was (because it wasn't) but referred me to the detailed legal language of the Plan (this is the only place it was in in addition to the presentation given by the financial advisor). However this detailed legal language of the Plan had never been shared with me during recruitment.

I certainly felt extremely fooled. Since then, I have asked HR to make sure the summary benefits document (that had been shared to me as part of the recruiting process). The document is still the same: not referring to the vesting period.

I am astonished about the shady HR techniques used to hide some critical information. Is this really legal? It is certainly not ethical. As I said, all documentation that was given to me during the recruitment did not disclose any of vesting information.

 

[cbg]

It is neither illegal nor unethical. Are you seriously going to tell me that your acceptance of the job would be based on whether the employer contributions for your 401(k) were or were not immediately vested? And if that wasn't the case, why did you need to know that immediately?

Two thoughts for the record:

1.) It is very, very rare these days for the employer portion of a 401(k) plan to have instant vesting. Anywhere between 3-5 years is common. I would guess the reason it was not mentioned is that it never occurred to your HR folk that anyone would imagine there wasn't one. If you've had not one but two employers with immediate vesting, you've been extraordinarily lucky.

2.) It's considered rude to hijack someone else's thread, even if it has been dead for four plus years. Next time, start your own.

 

[lmahuteau3]

Cbg, thank you for your prompt response.

As I am sure you are well aware of, a job acceptance is dependent on many factors (salary, 401k, insurance, professional development, relocation...). With that in mind and my previous situation, a vesting period (which in this case is 5 years) definitely makes difference and can make the balance tips one way or the other (acceptance of the offer or not). Nowadays, with workforce being extremely mobile, a 7% contribution match without vesting period is very different than a 7% vesting period with a 5 year cliff vesting period.

Would you consider a job where the employer told you 7% of your salary is actually vested in 5 year? Hopefully that gives you more insights on where I come from. Ethics can be subjective. I see we don't share the same definition. Also, may I ask you if you are an employment lawyer?

Finally, I apologize if the contributors to this thread felt I hijacked their discussion. I felt it was very much in line with the subject and thought I would contribute to it and share my experience.

 

[cbg]

But your salary isn't being vested. Your retirement plan is. It's not the same thing.

The job market is much better than it used to be, but it is still not such that there are very many people who can afford to make their final decision based on the length of 401(k) vesting. You are very fortunate if you can. As indicated, there are so few plans out there with instant employer-vesting that I very much doubt that your HR department even imagined you would think that to be the case.

I am an 35+ year HR professional who specializes in Benefits.

 

[davew128]

Would you consider a job where the employer told you 7% of your salary is actually vested in 5 year?

For one thing, an employer contribution is discretionary. Many places offer nothing. At all. Having a plan in the first place is discretionary. An employer match? Very nice, but the vesting is an incentive for the employee to stay.