Saturday, February 14, 2009

Phantom vesting strikes again

I left my old job in December 2007. The employer had a five-year vesting schedule for its 401(k) match, and since I'd worked at the job for just under two years, I assumed I'd be walking away from the unvested 80% of my match. Annoying, but them be the rules, and it was hardly incentive enough to turn down a new job I really wanted.

I didn't get around to organizing a rollover right away, though, and when I checked my 401(k) a few months later, I found that it was 40% vested. Even though I'd left the company, the extra 20% that would have vested on my two-year anniversary in February vested right on schedule.

One of my friends had previously mentioned that when she left IBM, her 401(k) kept vesting years later. Which made me wonder if the same thing was going to happen here. I mean, clearly, it shouldn't -- I'd even confirmed with HR before I left: I go, my vesting stops, right? Of course, said the HR rep.

And yet. This month would have marked my third full year with the company, if I'd stayed. And lo, when I logged on to check my 401(k) this morning, it's now 60% vested.

If this was just me, I'd assume something had gone seriously screwy. But since this is now the second time I've heard of this happening, I'm wondering how widespread it is. Are companies just routinely forgetting to tell their 401(k) vendors about employee terminations?

On a more practical note: I left the 401(k) alone this year as an experiment, to see if this would happen. If I wanted to absolutely maximize my returns, I guess I should leave it alone another two years and see if I can get the other 40% to vest. But since what remains unvested is now less than $1k, and there's still the chance my improperly-vested portion gets yanked back when I eventually do the rollover (I assume those forms will ask me what date I left), I'd rather go ahead and consolidate my accounts now.

Next step: Figure out if I should simply roll this over to my current 401(k) or if there's advantages to doing an IRA.