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  • Vesting when employer ceases to exist

    I've been at my job for a year.  We have a graduated, 5-year vesting schedule for employer contributions to our 401k's, and profit sharing.  Now, my employer is merging with (or perhaps more accurately, being acquired by) a large conglomerate (think Somnia, NAPA, Sheridan, etc).  My question is, what will happen to employer contributions that are already in my account, but which I am not vested in yet?  Do they:

    1. Disappear from my account.

    2. I get full vesting in them immediately.

    3. Stay on the original vesting schedule.

    4. Whatever arrangement the two corporations agree to.

    Are there IRS rules about this sort of thing?  Or can the company(ies) just do whatever it/they feel like?  I would suspect there are rules - but idk what they are.

    FWIW, they told us we'll get full vesting.  But again, idk what IRS rules may be, or what the other corporation may have to say about it, when the merger is finalized.

     

     

  • #2
    What does the plan documents say? If they say you'll get full vesting, I would imagine you'll get the full vesting.

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    • #3
      If your plan is being terminated, you become 100% vested regardless of the vesting schedule in the plan document

      You may want to check with your HR/practice administrator to find out more details on what is happening to your plan

      https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-employer-merges-with-another-company

      You may look into getting a side gig or doing some surveys ( something that pays you on a 1099) so that you can form a solo 401k that you completely control the investments in. Then you'll have a place to roll your previous 401k over to if your new megacorp plan sucks. I use fidelity for mine. Vanguard doesn't allow rollovers in their solo 401k, so avoid them for this purpose.

      Another tip if you go the fidelity solo401k route, you can print out the paperwork application online after you get your EIN number online, and drop off the completed application at a local fidelity investment brick and mortar location instead of mailing it in so your account gets setup super fast.

      The finance buff has a good tutorial and calculator for how to get it setup.

      Comment


      • #4




        If your plan is being terminated, you become 100% vested regardless of the vesting schedule in the plan document

        You may want to check with your HR/practice administrator to find out more details on what is happening to your plan

        https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-employer-merges-with-another-company

        You may look into getting a side gig or doing some surveys ( something that pays you on a 1099) so that you can form a solo 401k that you completely control the investments in. Then you’ll have a place to roll your previous 401k over to if your new megacorp plan sucks. I use fidelity for mine. Vanguard doesn’t allow rollovers in their solo 401k, so avoid them for this purpose.

        Another tip if you go the fidelity solo401k route, you can print out the paperwork application online after you get your EIN number online, and drop off the completed application at a local fidelity investment brick and mortar location instead of mailing it in so your account gets setup super fast.

        The finance buff has a good tutorial and calculator for how to get it setup.
        Click to expand...


        Yes, full vesting immediately.
        Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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        • #5
          Also, even without knowing details, these take-over deals end up badly for the working physicians. Start looking at neighboring practices now before everyone else jumps ship.

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