Author Topic: Can you negotiate with a new employer to contribute to a 401k early?  (Read 7759 times)

OneCoolCat

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This is out of pure curiosity, I'm not looking to make employment changes anytime soon.  Say an employer allows employees that have worked for it for atleast one year to a 401k plan and you were on the fence of whether to accept an offer from that employer.  We all know you can't negotiate for a higher employer contribution rate, but can you negotiate for earlier eligibility?  Something like immediate eligibility?

netskyblue

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #1 on: March 06, 2015, 09:29:13 AM »
A year, wow.  Most employers I've heard of have a 30, 60, or 90 day waiting period before you are eligible for any benefits (insurance, 401k, etc.) but I've never heard of a year!

theknitcycle

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #2 on: March 06, 2015, 09:56:36 AM »
Nope.  Eligibility and entry dates are written into the plan document, and employers have to follow their plan document to the letter and apply it equally across the board or they risk having the entire plan disqualified. 

Shade00

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #3 on: March 06, 2015, 10:06:41 AM »
As theknitcycle noted, plan eligibility is determined by the plan document, and an employer who deviates from the terms of the plan risks having the entire plan disqualified, with potentially catastrophic results for the participants.

My employer's plan had a 12-month waiting period to enroll in the 401k. If I had had some leverage (and a little knowledge) back then, I would have negotiated for some additional pay to make up for the missed contributions from switching employers.

kaizen soze

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #4 on: March 06, 2015, 11:28:30 AM »
This is why I usually front-load my 401k contributions towards the beginning of the year.  That way, if I unexpectedly change jobs, and the new job has a 12-month waiting period, you can usually max out 401k contributions, or come close, for both years.

johnny847

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #5 on: March 06, 2015, 11:33:07 AM »
This is why I usually front-load my 401k contributions towards the beginning of the year.  That way, if I unexpectedly change jobs, and the new job has a 12-month waiting period, you can usually max out 401k contributions, or come close, for both years.

On the flip side, some companies do their 401k matching such that if you don't spread out your 401k contributions evenly throughout the year, you miss out on the match: If you contribute 6% you get a 3% match. Simple right? Well, some companies will just match 50% of your contribution per paycheck until they hit the 3%. Other companies will put in 3% if you put in at least 6% of your paycheck. Meaning if you front load, you won't maximize the match.

So if you've front loaded, and then switched jobs to a place that offers a better match, distributed through the latter method mentioned above, you're missing out on match for that first year.


But assuming your company does your match in the former method, and you don't change jobs all that often, you will come out ahead most years by front loading.

Numbers Man

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #6 on: March 06, 2015, 11:38:57 AM »
Eligibility dates are all over the place when it comes to 401k plans. The documents of the plan controls so the company has to change the plan documents to change eligibility enrollment dates.

anon-e-mouse

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #7 on: March 06, 2015, 01:10:35 PM »
I have personally seen the 1 year requirement waved.
(it happened to me)

I have NO idea if all plans would allow it though.

Gone Fishing

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #8 on: March 06, 2015, 01:20:39 PM »
Are you sure it is a year to participate or just a year until they will match?

dunhamjr

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #9 on: March 06, 2015, 01:31:08 PM »
Are you sure it is a year to participate or just a year until they will match?

^this.

i have not ever seen a 401k i couldn't contribute to either day 1 or more then 30 days later... because of paperwork processing etc.

i HAVE seen a number of 401k plans where they would not match, or they would have a vesting schedule for you KEEPING the match, which was a year or longer.

Mississippi Mudstache

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #10 on: March 06, 2015, 01:37:17 PM »
Are you sure it is a year to participate or just a year until they will match?

^this.

i have not ever seen a 401k i couldn't contribute to either day 1 or more then 30 days later... because of paperwork processing etc.

i HAVE seen a number of 401k plans where they would not match, or they would have a vesting schedule for you KEEPING the match, which was a year or longer.

I have definitely worked for an employer where you weren't eligible for the 401k for the first year. No vacation for the first year either. I got out of that hellhole as quickly as possible, which turned out to be 9 months. It was a relatively small, privately owned corporation.

Gone Fishing

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #11 on: March 06, 2015, 01:49:30 PM »
Drift warning!  My first "career" job had a 20-40-60-80-100 vesting schedule, my second job had no match for the first year then 100% vesting after that.  At first glance the 100% after the first year might sound better, but effectively the vesting schedule would be 0-50-67-75-80-83-86-88... getting better each year but never actually reaching 100%, plus you would have lost the oldest contribution, the one with the most time to compound.  The only benefit would be to someone quitting in year 2 or 3.  Would probably never make a big enough difference to decide on a job, but the difference is interesting.   

Mississippi Mudstache

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #12 on: March 06, 2015, 03:23:07 PM »
Drift warning!  My first "career" job had a 20-40-60-80-100 vesting schedule, my second job had no match for the first year then 100% vesting after that.  At first glance the 100% after the first year might sound better, but effectively the vesting schedule would be 0-50-67-75-80-83-86-88... getting better each year but never actually reaching 100%, plus you would have lost the oldest contribution, the one with the most time to compound.  The only benefit would be to someone quitting in year 2 or 3.  Would probably never make a big enough difference to decide on a job, but the difference is interesting.

Interesting point. My last two employers offer the 20-40-60-80-100 vesting schedule. I have never stayed anywhere longer than 3 1/2 years, and I'm starting to doubt that I will. There's just too much incentive to be mobile.

Further drift warning: When I left my last employer after 3 1/2 years, I kept expecting them to take back 40% of their contributions, since I didn't make it to 4 years. They never did. Do they take it back if I rolled it over into an IRA? I'm afraid to ask them, then have them thank me for pointing out the oversight and taking the money back.

Gone Fishing

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #13 on: March 06, 2015, 03:29:11 PM »
Drift warning!  My first "career" job had a 20-40-60-80-100 vesting schedule, my second job had no match for the first year then 100% vesting after that.  At first glance the 100% after the first year might sound better, but effectively the vesting schedule would be 0-50-67-75-80-83-86-88... getting better each year but never actually reaching 100%, plus you would have lost the oldest contribution, the one with the most time to compound.  The only benefit would be to someone quitting in year 2 or 3.  Would probably never make a big enough difference to decide on a job, but the difference is interesting.

Interesting point. My last two employers offer the 20-40-60-80-100 vesting schedule. I have never stayed anywhere longer than 3 1/2 years, and I'm starting to doubt that I will. There's just too much incentive to be mobile.

Further drift warning: When I left my last employer after 3 1/2 years, I kept expecting them to take back 40% of their contributions, since I didn't make it to 4 years. They never did. Do they take it back if I rolled it over into an IRA? I'm afraid to ask them, then have them thank me for pointing out the oversight and taking the money back.

Is it still sitting in their plan?  If so they will probably do it when you roll it out.  That's what they did with my wife's account.  It was pretty sad, but accurate.  The reason they gave is that if she left it in the plan and came back to work for them, they would resume the vesting schedule.  Better to do it now if you never plan to go back, it only hurts worse the longer you wait!

dandarc

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #14 on: March 06, 2015, 03:33:53 PM »
When I rolled out of my last employer's plan (solo401K now - hurrah for super-high matching!), they took the vesting into account then.  But then for over 2 years, after that, there would be random small rollovers.  One time they even sent me a check for like $200.  I'm guessing they screwed something up and were correcting it but never got a good explanation.

Researcher

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #15 on: March 07, 2015, 08:11:34 AM »
Anecdotally - I worked as an intern for my employer for a year before being hired full time. I wasn't supposed to be eligible to contribute to my 401k until the following January, but they used my internship start date instead of my full time hire date, so I was able to contribute right away.

Hey It's Me

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Re: Can you negotiate with a new employer to contribute to a 401k early?
« Reply #16 on: March 07, 2015, 08:42:00 PM »
I would and could not accept that offer, at least not unless they were willing to up my salary/bonus to compensate for the extra taxes I would have to pay as a result of their shitty plan. At the 25% marginal bracket, not contributing to your 401(k) will cost you $4,500 directly. (Not to mention the opportunity cost of a potential match from another employer.)

Word of advice: discount the salary offer from this job by:
  • The taxes you'll owe as a result of not contributing to a 401(k)
  • An additional 3-5% of your salary (pretty standard for a company 401(k) match policy)