Wow! Pension contributions refunded!

[araminty]

I just heard that I'll be getting a $14,000 windfall. A previous employer (a large city government) is refunding the pension contributions for separated, unvested employees. I'm electing to stick it all into my still-existing 457(b) plan from the same employer, which has very low fees and is actually weathering the recent stock market weirdness very well.

I'm kind of shocked. I'll be getting my forms (sooo many forms) filled out and sent in ASAP, just in case.

Anyone heard of this before? I wonder if there's any chance of my current (but not for much longer) employer doing the same thing?

[beltim]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

[Cromacster]

At my current employer we have the option to withdraw our pension at separation.  It can go to an IRA or cash.  Or we can leave it as is in the company pension system.

[araminty]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

[beltim]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

[forummm]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

I've seen some that let you keep the contributions in place in case you rejoin the employer later. But you may have to proactively select that option upon separation with some employers or else they will default to refunding them.

[Gone Fishing]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

Interesting, I always figured they went back to the employer, like unvested 401(k) matching.

[beltim]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

Interesting, I always figured they went back to the employer, like unvested 401(k) matching.

Legally, employee contributions to pensions are set up as "deferred compensation" so I don't really see how employers could withhold them unless asked, as forummm pointed out that some employers do.

[forummm]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

Interesting, I always figured they went back to the employer, like unvested 401(k) matching.

Legally, employee contributions to pensions are set up as "deferred compensation" so I don't really see how employers could withhold them unless asked, as forummm pointed out that some employers do.

Some (all?) pensions even let you get them back even after you've vested (you just give up the pension).

[Gone Fishing]

This is standard practice for employee pension contributions when the employee doesn't vest in the plan.  Sometimes you even get interest on the contributions!

Really? It wasn't mentioned when I separated from this employer.

Yes. It has been a feature of every plan I've seen. It's possible that it's required by law, though I don't know this to be true.

Interesting, I always figured they went back to the employer, like unvested 401(k) matching.

With most public pensions you are paying a certain percent each pay period (like mine was 7%) and your employer pays a matching percentage into the pension system. If you quit before you are vested you get back your contribution (often with interest) but not your employers contribution. That income is taxable if not rolled over into an other tax-deferred plan like an IRA though so the OP should make sure he/she rolls it over or will have to add that amount to his/her income taxes. Also, if an employee is re-hired by the same agency (or even a different one) but has already taken out their prior non-vested pension $$'s, they can usually "buy back" those years of former employment and add them to their current employment years. So if you worked 3 years, quit, got the lump sum non-vested pension contributions returned to you, then re-hired a couple of years later you can have additional $$'s taken out of your pay (usually tax deferred) to buy back your prior years employment time and add them back into your pension. Many public agency's (and the Feds) also allow you to buy back any military time you have to add extra years to your pension too.

ETA: A lot of public employees don't realize that they are contributing to their public pension because often their employer covers both parts of the contribution - the employees and the employers share  - as a benefit. So they don't see that percentage taken out of their pay each month and assume they can't get back anything if they leave their jobs. But even if your employer is paying for the whole thing, you still are entitled to part of it as it is still earmarked as your share of the contributions.

Ahhh.  Much clearer, thanks!

[rubybeth]

This is not weird at all. They're your contributions, so they should go back to you. I'm surprised they didn't offer you the option to roll them over when you left the employer; that might have actually been illegal.

[Blonde Lawyer]

A couple years ago I called the state where I previously worked and was told there was no money to roll over.  After reading your post, I called again and there is $1500.  Not a ton but better than the nothing I was originally told!

[Kimchi Bleu]

Araminty and Blonde Lawyer - Wonderful news on your pension refunds.

[hubstash]

I'm so glad I found this post!

I had the same experience as Blonde Lawyer. When I left my job with a state government several years ago, I was told by a confused HR person that I had to forfeit all pension contributions. After reading this I decided to call the state pension system directly. Bam! $2275 I wasn't expecting to have! I think the HR person must have been confused about the state's contributions on my behalf, which were not vested.