Being Fired Doesn’t Affect Retirement Vesting

March 12th, 2009  |  Published in 401K, Pensions  |  Comments Off on Being Fired Doesn’t Affect Retirement Vesting

If you are fired, it doesn’t affect the vesting status of your retirement assets. Any funds that hadn’t vested, will expire. Any funds that had vested, are yours to keep forever. Any contributions you made are always yours, regardless of how long you’ve been there or how the vesting schedule works. Your money is always yours.

Here’s a likely scenario – you contribute 6% of your salary to your defined contribution 401(k) plan and your company matches fifty cents on the dollar, kicking in 3%. The employer match doesn’t vest for a full year, meaning the 3% they put in doesn’t become yours until after a year. If you are fired in the next year, they will deduct the 3% from your account and leave you your 6%. The 6% you contributed is always yours, they can never take that away. The vesting schedule of 1 year simply means that the employer’s contribution isn’t yours until one year.

The same rule applies to defined benefit plans like pensions. Whatever you have vested is yours to take, role over into another account, whatever.

Being fired sucks, regardless of how much you get to keep, but at least you get to keep what’s rightfully yours.

Retirement Assets After A Layoff

January 17th, 2009  |  Published in 401K, Pensions  |  1 Comment

Being fired isn’t something you want to think about but with the economy in the sad state that it’s in, you should prepare for the worst and hope for the best. It’s important to find out what could happen to your retirement assets in the event you are laid off and fortunately, in most scenarios, your asset will be protected.

Your 401(k), or similar defined contribution retirement plan, will exist in a separate account outside the control of the company. Should they fire you, go out of business, or close for any reason, the funds should be in a separate account. Since it is in a separate account, in the custody of a financial firm, you can still access it, transfer it, and manage as you would if the company hadn’t fired you or closed up shop. What happens if you have company matching funds that haven’t vested when the plan ends? No problem, by law they vest immediately. There is a down side, if you borrowed money then you will be required to pay back the funds within 60 days of the plan terminating.

What about pensions or a defined benefit plan? If you are laid off, you should still be able to collect your benefits without a problem. If you company bankrupts, then you may have to turn to the Pension Benefit Guaranty Corp. to collect your benefits. They insure pensions and pay out a maximum of $54,000 a year in benefits based on what you had in your plan.

If you are fired, leave your job, or the company goes bankrupt, you will probably want to transfer your retirement assets into an IRA as soon as possible.