Being Fired Doesn’t Affect Retirement Vesting

by Andy Hough on March 12, 2009

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.

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