Author Topic: Understanding my benefits? Vesting?  (Read 4760 times)

Bracken_Joy

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Understanding my benefits? Vesting?
« on: September 14, 2015, 03:01:02 PM »
This is a bit embarrassing to ask, but I'm having a hard time understanding the benefits offered to me at my new job. It's a variable time position, so that may have an impact on some of it- the 1,000 hrs per year part I guess.

"XYZ company match is 33 cents for every dollar the employee defers up to and including the first 6% of covered income. The Company match vesting is 20% per year (minimum 1,000 hours required annually)."

I get the first part, about the match (and am quite excited about it). But what does company match vesting mean? I found an article that says:

Quote
Any money you contribute from your paycheck is always 100% yours. But company matching funds usually vest over time - typically either 25% or 33% a year, or all at once after three or four years. Once you're fully vested, you can take the entire company match with you when you part ways with your job. If you're not fully vested, you'll get to keep only a portion of the match or maybe none at all. To find out your vesting schedule, check with your company's benefits administrator.

So does that mean I would have to stay for 5 years to take all the company matching with me? But I keep everything I contribute, right?

AZDude

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Re: Understanding my benefits? Vesting?
« Reply #1 on: September 14, 2015, 03:05:20 PM »
Yes. All your contributions are yours, but the company portion vests at just 20% per year, if you work at least 1,000 hours that year. 1,000 hours is basically the equivalent of 25 full time weeks, or like 5 normal months.

Bracken_Joy

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Re: Understanding my benefits? Vesting?
« Reply #2 on: September 14, 2015, 05:32:39 PM »
Thank you! I wanted to be sure I was reading that right.

Any insight into whether this is a good/bad match? Average? Or is that pretty industry specific?

lbmustache

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Re: Understanding my benefits? Vesting?
« Reply #3 on: September 14, 2015, 05:38:36 PM »
How long do they cap the vesting at 20%? Indefinitely? For example, one of my employers had 0% if you left the first year, 15% 2nd year, etc. and then after 5 years you could keep all of the company match.

Bracken_Joy

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Re: Understanding my benefits? Vesting?
« Reply #4 on: September 14, 2015, 06:33:28 PM »
How long do they cap the vesting at 20%? Indefinitely? For example, one of my employers had 0% if you left the first year, 15% 2nd year, etc. and then after 5 years you could keep all of the company match.

That's what I'm asking, lol. I think maybe it's an extra 20% per year? So like, 20 the first, then 40 the second, etc, so you keep it all after 5 years?

Tigerpine

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Re: Understanding my benefits? Vesting?
« Reply #5 on: September 14, 2015, 06:49:02 PM »
Thank you! I wanted to be sure I was reading that right.

Any insight into whether this is a good/bad match? Average? Or is that pretty industry specific?
I can tell you what my company matches.

100% on the first 3% of salary I contribute
50% on the next 2% of salary I contribute

In other words, to get the maximum matching funds, I need to contribute at least 5% of salary.

I also worked at a company previously that did not offer any 401(k) match at all.

Lanthiriel

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Re: Understanding my benefits? Vesting?
« Reply #6 on: September 14, 2015, 09:47:33 PM »
How long do they cap the vesting at 20%? Indefinitely? For example, one of my employers had 0% if you left the first year, 15% 2nd year, etc. and then after 5 years you could keep all of the company match.

That's what I'm asking, lol. I think maybe it's an extra 20% per year? So like, 20 the first, then 40 the second, etc, so you keep it all after 5 years?

Yes, you've got it right :) Say you're making $100k/year and they're matching 10% of your salary (so $10k/year for ease of math). If you leave after 3 years, you're only 60% vested, so you walk away with $18k instead of the full 30k they've put aside for you. Plus 100% of anything you put away in that time period.

Jeremy E.

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Re: Understanding my benefits? Vesting?
« Reply #7 on: September 14, 2015, 10:05:16 PM »
This is a bit embarrassing to ask, but I'm having a hard time understanding the benefits offered to me at my new job. It's a variable time position, so that may have an impact on some of it- the 1,000 hrs per year part I guess.

"XYZ company match is 33 cents for every dollar the employee defers up to and including the first 6% of covered income. The Company match vesting is 20% per year (minimum 1,000 hours required annually)."

I get the first part, about the match (and am quite excited about it). But what does company match vesting mean? I found an article that says:

Quote
Any money you contribute from your paycheck is always 100% yours. But company matching funds usually vest over time - typically either 25% or 33% a year, or all at once after three or four years. Once you're fully vested, you can take the entire company match with you when you part ways with your job. If you're not fully vested, you'll get to keep only a portion of the match or maybe none at all. To find out your vesting schedule, check with your company's benefits administrator.

So does that mean I would have to stay for 5 years to take all the company matching with me? But I keep everything I contribute, right?
If you make $100,000 and put 5%($5,000) into your 401k your first year, the company will put in $1666.66.
If you leave before working 1000 hrs in 1 year, you will only get the $5,000 you put in back and the $1666.66 will not be yours
If you work 1000 hrs in 1 year, then leave the next year, you will get 20% of that $1666.66 + your $5,000 so you'll get $5,333.33
After 5 years you would get the full $1,666.66 from your first year.

I would say standard match for engineers is full match up to 3-5%
I don't think 1/3 match up to 6% is all that great, it's basically a 2% match with fancy lingo, but employee match is a much elss important factor than most things, like the base pay, if you like the location, the company, the people, the work, etc.
My company has an ESOP (Employee Stock Ownership Plan), they give me 15% of what I make in company stock, and I have the exact same vesting as you, every year that I work 1000 hrs it increases 20%. Sure it's risky having that much stock invested within 1 company, and they don't let me sell the stock until I leave the company, but it's basically free stock, so I'm not complaining.

MDM

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Re: Understanding my benefits? Vesting?
« Reply #8 on: September 14, 2015, 10:24:46 PM »
I think maybe it's an extra 20% per year? So like, 20 the first, then 40 the second, etc, so you keep it all after 5 years?
Yes, you've got it right :) Say you're making $100k/year and they're matching 10% of your salary (so $10k/year for ease of math). If you leave after 3 years, you're only 60% vested, so you walk away with $18k instead of the full 30k they've put aside for you. Plus 100% of anything you put away in that time period.

If you work 1000 hrs in 1 year, then leave the next year, you will get 20% of that $1666.66 + your $5,000 so you'll get $5,333.33
After 5 years you would get the full $1,666.66 from your first year.

Check with your HR department to confirm, but from the OP it seems the clock resets every year for new company matches. 

In other words, the post from Jeremy E. looks correct. 

In Lanthiriel's example, however, it seems if "you leave after 3 years, you're...60% vested [in the first year's match, 40% vested in the second year's match, and 20% vested in the third year's match], so you walk away with [$6K + $4K + $2K = $12K] instead of the full $30K they've put aside...". 

Might even be worse, depending on the definition of "per year" - e.g., does the 2015 match vest on 12/31/15, or 12/31/16, or...?

Or it might be better and Lanthiriel's example is correct.  But you should confirm with HR, preferably with a "for example" based on your specific numbers.

Jeremy E.

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Re: Understanding my benefits? Vesting?
« Reply #9 on: September 14, 2015, 10:36:47 PM »
I think maybe it's an extra 20% per year? So like, 20 the first, then 40 the second, etc, so you keep it all after 5 years?
Yes, you've got it right :) Say you're making $100k/year and they're matching 10% of your salary (so $10k/year for ease of math). If you leave after 3 years, you're only 60% vested, so you walk away with $18k instead of the full 30k they've put aside for you. Plus 100% of anything you put away in that time period.

If you work 1000 hrs in 1 year, then leave the next year, you will get 20% of that $1666.66 + your $5,000 so you'll get $5,333.33
After 5 years you would get the full $1,666.66 from your first year.

Check with your HR department to confirm, but from the OP it seems the clock resets every year for new company matches. 

In other words, the post from Jeremy E. looks correct. 

In Lanthiriel's example, however, it seems if "you leave after 3 years, you're...60% vested [in the first year's match, 40% vested in the second year's match, and 20% vested in the third year's match], so you walk away with [$6K + $4K + $2K = $12K] instead of the full $30K they've put aside...". 

Might even be worse, depending on the definition of "per year" - e.g., does the 2015 match vest on 12/31/15, or 12/31/16, or...?

Or it might be better and Lanthiriel's example is correct.  But you should confirm with HR, preferably with a "for example" based on your specific numbers.
Mine doesn't restart every year, after 5 years with 1000 hrs in each, I'll have 100% from all years I've been there, and I'll get 100% from each following year. I assume his is the same, but I could be wrong.
« Last Edit: September 14, 2015, 10:38:23 PM by Jeremy E. »

2Birds1Stone

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Re: Understanding my benefits? Vesting?
« Reply #10 on: September 15, 2015, 06:07:54 AM »
I think maybe it's an extra 20% per year? So like, 20 the first, then 40 the second, etc, so you keep it all after 5 years?
Yes, you've got it right :) Say you're making $100k/year and they're matching 10% of your salary (so $10k/year for ease of math). If you leave after 3 years, you're only 60% vested, so you walk away with $18k instead of the full 30k they've put aside for you. Plus 100% of anything you put away in that time period.

If you work 1000 hrs in 1 year, then leave the next year, you will get 20% of that $1666.66 + your $5,000 so you'll get $5,333.33
After 5 years you would get the full $1,666.66 from your first year.

Check with your HR department to confirm, but from the OP it seems the clock resets every year for new company matches. 

In other words, the post from Jeremy E. looks correct. 

In Lanthiriel's example, however, it seems if "you leave after 3 years, you're...60% vested [in the first year's match, 40% vested in the second year's match, and 20% vested in the third year's match], so you walk away with [$6K + $4K + $2K = $12K] instead of the full $30K they've put aside...". 

Might even be worse, depending on the definition of "per year" - e.g., does the 2015 match vest on 12/31/15, or 12/31/16, or...?

Or it might be better and Lanthiriel's example is correct.  But you should confirm with HR, preferably with a "for example" based on your specific numbers.
Mine doesn't restart every year, after 5 years with 1000 hrs in each, I'll have 100% from all years I've been there, and I'll get 100% from each following year. I assume his is the same, but I could be wrong.

This is how it works at my megacorp

Bracken_Joy

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Re: Understanding my benefits? Vesting?
« Reply #11 on: September 15, 2015, 08:23:16 AM »
Excellent, thank you guys! I will have to check with HR to see if it's a descending sequence (at 5 yrs, 100% of year 1, 80% of year 2, etc), or if it works like the "Megacorp". Thank you all so much for your help! I'll write out two pretty basic charts to ask about.

Everything about this job is so hard to calculate, since I'll be working on a per diem/variable contract basis. I know my hourly base wage, but not my hours, and there are differentials for different assignments. Oh well, I'm excited to have a match at all- initially I didn't think there was one.

100% on the first 3% of salary I contribute
50% on the next 2% of salary I contribute

Oooh, I'm jealous of that.

Tigerpine

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Re: Understanding my benefits? Vesting?
« Reply #12 on: September 15, 2015, 06:18:58 PM »
Yeah, but I'm jealous of all the compounding interest you'll accumulate on your investments by starting at your age.  I'd say you have the better deal of the two, because you have 15 years to reach my age, and we both started our 401(k)s at basically the same time. 

Bracken_Joy

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Re: Understanding my benefits? Vesting?
« Reply #13 on: September 15, 2015, 07:53:29 PM »
Yeah, but I'm jealous of all the compounding interest you'll accumulate on your investments by starting at your age.  I'd say you have the better deal of the two, because you have 15 years to reach my age, and we both started our 401(k)s at basically the same time.

But think of how lucky we BOTH are that we discovered MMM at all! =) Better living through frugality and a judicious disregard of social norms! Frugal weirdos, unite!

Tigerpine

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Re: Understanding my benefits? Vesting?
« Reply #14 on: September 16, 2015, 05:00:10 AM »
Yeah, but I'm jealous of all the compounding interest you'll accumulate on your investments by starting at your age.  I'd say you have the better deal of the two, because you have 15 years to reach my age, and we both started our 401(k)s at basically the same time.

But think of how lucky we BOTH are that we discovered MMM at all! =) Better living through frugality and a judicious disregard of social norms! Frugal weirdos, unite!
Amen to that, brother/sister!