401k vesting of interest on employer matching?

[Guest Herigstad]

For a vesting 401k plan, the employee contributions and their returns vest immediately and the employer matching contributions vest over a period of time. What about the interest and other returns on the employer matching? And if they, too, vest over a period of time, are they held separately from the vested portion of the account? If the account buys different mutual funds, how is it tracked?

I need backup references if possible! Thank you.

[stephen]

Generally, the entire matching account vests on the same schedule. I cannot imagine trying to track any other method.

For plan years beginning after 12/31/01 new matching contributions have to vest on a three year cliff (0,0,100) vesting schedule or a 6 year graded (0,20,40,60,80,100) vesting schedule.

[KIP KRAUS]

I agree with Stephen. That is the standard way of computing a matching account. You may want to think of it in this manner, if you don’t own the assets that are generating the income why should you own the income generated by the assets?

[Guest Herigstad]

So do they track the employer contributions separately, as if it's a different account? It seems like you would have to, otherwise you wouldn't know what funds were invested in which.

This is for software development, so I need to know how to calculate it.

[rcline46]

In the nicest possible way, without insulting you or your company -

DON'T DO IT. BUY IT. IT WILL BE CHEAPER. THERE ARE MANY RECORDKEEPING SYSTEMS OUT THERE.

[KIP KRAUS]

The answer is yes you have to account for it separately. The participant's account statement will show the total account balance and the amount vested. However, Herigstad makes a good point.