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Full vesting of 401(k) benefits after merger

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My company merged with another company, and I’m not sure I want to stay there. I’ve been employed for four years, and the company rep says I’ve now become fully vested in my 401(k). Is that possible? R.H., Detroit

A. Yes. Under a 2001 tax law change, a 401(k) plan must use either three-year “cliff” vesting or a gradual vesting schedule reaching 100 percent after six years. Maybe your old company used the gradual-vesting method. But if the new company uses a plan with cliff vesting, you should be fully vested in your 401(k) after the merger, even though the length of your employment equals only four years.

: You can roll over the 401(k) benefits tax-free into another qualified plan or an IRA.

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