Even when your employer offers a 401k through its benefit program, the money in the 401k still belongs to you, the employee. Your employer is responsible for depositing the amount you withhold from your paycheck plus any promised matching of funds. The employer is also responsible for managing the funds and reporting to you on the performance. The employer cannot use the funds in the account, but there is a window of time before funds hit the account where the rules are less clear.
401k Contribution Regulation
When you declare an amount to withhold from each paycheck to be deposited in your 401k account, your employer is responsible for making the deposit. This must be done by the 15th of the month following the month your payment was withheld. In this period of time, the funds are still in the employer's pocket. While the Department of Labor provides general guidelines for when this money is officially considered a part of the general assets of the employee's 401k, there is a gray area in the regulation that provides some flexibility. Theoretically, an employer could use this money for another purpose so long as sufficient assets were available to make the mandatory deposit on the employee's behalf by the time the deposit is required.
401k Matching Regulation
The rules on when an employer must deposit a promised 401k match are different from those governing the deposit of an employee's withholding. A 401k match is the company's offer to deposit funds above and beyond the employee's contribution to encourage savings. In addition to offering a benefit to employees, matching gives the employer potential tax write-offs. If your employer matches your deposits, the deadline is the tax-filing deadline for the employer's tax return for this fiscal year, taking into account any extensions. This means the employer could hold onto the funds all year, using them as it pleases, and only vesting the funds at the year's end. However, many employers choose to deposit a match quarterly or monthly to spread out the cost.
Fully Vested Funds
When your contribution and the employer's matching contribution are deposited in your 401k account, they are said to be "vested." Once the funds are vested in the account, they are yours to save, invest or use. You may be limited by the rules and regulations of your employer's 401k plan. Many plans limit the types of investments you can make and whether or not you can take loans from the account. However, even though you do not have complete flexibility with the money, your employer cannot access the money for its own purposes.
Recovering 401k Funds
If you leave your employer, the employer has no access to your money. It is still yours, even if you abandon your 401k entirely. Many people make this mistake, and you have a right to recover your funds in the future, even if the company changes names or closes. Your company is required to notify you if it is going out of business, changing your plan or changing addresses. You should receive documentation on your past 401k. If you do happen to "lose" your 401k, you may check with the Department of Labor to see if papers were filed on the lost account. Even if you failed to rollover, transfer or withdraw the funds, your employer cannot use the funds.
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