Full vesting of 401(k) benefits after merger — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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.
Tip: You can roll over the 401(k) benefits tax-free into another qualified plan or an IRA.
If you classify any workers as "independent contractors”—or have plans to do so—now is the time to make sure you get that classification correct. A massive new "Misclassification Initiative” launched by the IRS and U.S. Department of Labor is targeting employers with more audits and closer scrutiny. The IRS estimates that 80% of workers classified as "independent contractors” are actually employees....Click here to find out more.