401k

[Guest Stras]

My company is merging with another - those employees being severed are receiving 100% vestment in their 401(k); however, I'm told if I "transfer" (accept new role with new organization), that I am not vested and can only roll over my own contributions and will then of course fall under their plan. Why wouldn't my total contributions roll over (company matching) when my organization is closing it's doors and we are merging?

[Alf]

It is probably being treated as a partial termination. Enough people are being terminated that they are treating the terminations as a partial termination of the plan. Only those employee affected by the partial termination are entitled to full vesting. If you are not terminated, your account will be merged into the new plan and you will not be fully vested.

[Guest lforesz]

This is probably considered a "same-desk" situation so your 401(k) account is not eligible to be distributed to you if continue to work for the acquiring company. Your account balance is probably being transferred via a plan to plan transfer, and not a rollover. However, your entire account balance (including any nonvested employer match amounts and profit sharing) should be transferrred to the new plan and you should continue to vest in those amounts. I do not think those amounts should be forfeited since you are not considered to have terminated employment. If they do consider you to have terminated employment, then, you, like the others who were severed, should become 100% vested and the result is the same.

Does anyone feel differently?

[Guest Jeff V]

I believe the same desk rule only applies when there is a transfer of less than a qualified separate line of business (or a "division").

[Guest Jeff V]

Ooops. Hit "POST REPLY" too soon...

To continue, I believe that vesting is a protected benefit under IRC 411(d)(6), so if it is a merger, they cannot change make your vesting any worse than it was, although they may, at their discretion, vest everybody at 100%. Perhaps they are doing this only with the people who are being terminated. The plan may provide for 100% vesting in event of termination due to merger. If the plan was to be terminated, everybody would have to be 100% vested (IRC 411(d)(3)).

[Guest hank]

The "same desk" rule has been "repealed" by EGTRA.

[Guest Jeff V]

Hank,

Was that retroactive or effective 1/1/02?

[Earl]

As I understand it, it is not retro, however @ 1/1/02 it disappears without regard to the date of the transaction in question. So 1/1/02 it becomes retro.

do you see it that way?

[Guest Jeff V]

Stras,

I'm not sure if we've gotten off track... or if same desk is applicable. Based on your original post, I don't think same desk applies, but the discrepancy between the people terminating and yourself with respect to vesting is ok as long as they allow you to continue to vest at a rate that is at least beneficial to you as before. See IRC 411.

Earl,

I think if the merger already happened, then it would make a difference to when the law takes effect. I mean, if the merger happened in 2001 and they applied the same desk rule (assuming it was applicable), I suppose they could (should?) administratively go back and "unflag" the affected accounts, to allow distributions of 401(k) funds.