Guys, do you know what happens to unvested 401K after leaving intel? I quit intel in Fall 2015, but my fidelity account still shows the unvested 401K balance. Wasn't this unvested balance supposed to be taken away upon termination? Will this balance vest eventually at if yes, when?
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IRS rules for unvested 401K matching contributions area clear. Any unvestted contributions are yours when you turn 65. I belive this does not apply for those who have worked less than 500 hours with that particular emplyer.
EXCEPTIONS TO 401(K) VESTING RULES
Though cliff vesting and graded vesting are the typical vesting schemes, there are two exceptions to the rule:
All employees must become 100% vested by the time they attain normal retirement age under the plan, or
When the retirement plan is terminated by the employer
That provides an obvious advantage to anyone who takes a new job shortly before retirement age. In that situation, if you took a job with the company at age 62, participated in its retirement plan – which set the retirement age at 65 – you would be 100% vested in the employer matching contributions upon turning 65.
Meaningful threads like this make me come back to thelayoff.com
Since a layoff is not the employee's seeking termination, but the employer, it would be nice from Intel to let ISP/VSP folks take the unvested portion.
I have verified with HR and payroll that 401K RC will be accelerated to 100% for curren ISP/VSP folks. Takes 30-60 days from termination date.
Intel had vesting schedules as a retention incentive back in the days of a more competitive environment for US tech workers. These days the environment is the opposite--you hope you can hang on long enough to get vested before you get booted. And, just so you know, the 401k doesn't 'vest'--that's only for Intel's voluntary RC, not your 401k.
The vesting period is relatively short though, I believe 5 years. After that, the money is 100% yours at anytime and all new contributions by Intel are fully vested the day of contribution.
enp here. No, it will cease to vest once you've termed. That's the whole point to your employer for having a vesting schedule. It's in hopes to retain people for at least that long thinking people will look at what they are leaving on the table and stick around longer. So... once you leave only the vested portion is yours. The "the yearly intel retirement contribution (typically 5-6%)" is the RCP (Retirement Contribution Plan) I mentioned.
Regarding this ""they said that if I rollover ot IRA, my unvested balance will disappear." Yes, that's correct. If you leave before you're fully vested as I've said.... that money is not yours, so yes, it will disappear. It's not yours to begin with. Intel only allowed you to look at what you COULD HAVE HAD if you stayed long enough to be fully vested. If you look at another screen, it will show you the full balance, and what portion of that is yours. You can, however, roll the vested portion into either a rollover IRA at Fidelity or elsewhere, or into your current employers 401K plan (if they allow that).
Due to your age, and the fact you likely could have more employers between now and retirement... I'd roll it into a 'Rollover IRA'. Do NOT ask for the money or you're have to pay taxes on it AND will be subject to a hefty penalty. Or, if you like the funds where it's currently in you can keep it where it is if you have over $5K. They'll not want to hang onto your money if you have less than that.
I'd call Fidelity NetBenefits to discuss your options and to make sure you're very clear on those before acting.
Good luck.
OP here again. Thanks for the detailed replies specially enp and tnx.
I left on my own and in my 30s, so long way from retirement. I think the unvested amount in my fidelity 401K is the yearly intel retirement contribution (typically 5-6%). Would it keep vesting even after termination? I called fidelity and they said that if I rollover ot IRA, my unvested balance will disappear. Wondering if I should wait for the retirement contribution to vest before rolling over, but i'm not sure if it will vest after termination.
I'm not 100% in agreement with @tnx who said "Best to roll it over, clear the decks, and take control."
Doing so isn't always a wise move due to the "Age 55 Rule" (obviously only if this applies to you):
If you are 55 years old or older in the year you left your job and you need to take a distribution of your retirement plan funds immediately, you should leave the money in your company plan and take your withdrawals from there. The reason is because distributions from your company plan, when you leave the company in the year you turn age 55 or later, are not subject to the 10% early distribution penalty if you no longer work for that company (or what the tax code refers to as “separation from service”). Remember, though, that the distribution would still be subject to federal income taxes.
Another consideration is the fact 401K plans can have some institutional mutual funds that charge a much lower fee than if you bought the same fund in a rollover IRA or brokerage account (non-401K). Before someone complains about the limited choices in your 401K plan.... then they haven't explored BrokerageLink. You can move some or all of your money over to BrokerageLink WITHIN your 401K... and choose from ANY mutual fund or ETF. You just aren't allowed to buy individual stocks over there or some other oddities.
Call Fidelity NetBenefits to discuss. I haven't done it in years but the process is something like sell whatever funds you want to move into BrokerageLink, wait till they hit the cash account, THEN transfer the cash over to BrokerageLink (I think they might have to do that for you), THEN buy whatever you want over there. Sky's the limit!
And to echo what someone else said... your 401K is YOURS. It was YOUR money you contributed into it. Therefore there is NO vesting. However, if you're thinking of an account that vests.... that would be the RCP (Retirement Contribution Plan). That's the account that Intel puts money in every year. THAT account has a vesting scedule. I think it's something like 5 years and it's completely yours. I could be wrong on how many years it is but if you log into NetBenefits and click on it, it will show you how much is vested (all or some). Do not confuse your 401K (which YOU contributed to via your paycheck) with the RCP portion (Intel's contribution which vests).
Good luck.
Invested amounts vest on death.....will make wife happy and her bf
Typically with most 401k plans, if you were separated, but did not roll over the 401k to a Rollover IRA, then the 401k remained with Fidelity and any unvested portion won't be clawed back until you request a withdrawal.
Best to roll it over, clear the decks, and take control.
My understanding was that the RC vests fully whenever you hit age 60 but if you terminate before that age, you lose it. That's under normal circumstances. Not sure if the ERP eligible folks got some kind of enhanced acceleration.
What do you mean unvested 401k? You mean the Intel RC or your own 401k contributions? The latter don't need to 'vest'.
Intel is collecting more unvested 401Ks to be able to pay for Murthy's plane
Intel is collecting more unvested 401Ks to be able to pay Murthy