A 401(k) employer match or non-elective contribution is money your company contributes to your retirement account. But, because you’re essentially earning free money from your employer, those funds may be subject to what’s known as a “vesting schedule” depending on the options your company has chosen for its 401(k) plan.
A vesting schedule will define the amount of time you must work for your employer before you are entitled to keep the employer contributions.
What happens if I leave my company before I am fully vested?
If you leave your company for any reason before the funds are fully vested, you will forfeit all or a portion of the unvested funds. Any unvested employer contributions will go into the plan’s “forfeiture account” and will be used for plan expenses or be redistributed to other employees, depending on the terms of the plan.
Can I earn additional vesting on the forfeited amount if I’m rehired by the same employer?
What happens to any forfeited amount will depend on two things: (1) how long has it been since you left that employer and (2) whether you took a distribution from the plan when you left.
If it has been more than five years since you left the company you can never earn any more vesting on the amount that was forfeited. That forfeiture is permanent.
However, if it has been less than five years since you left the company, the time you work after being rehired may be used to advance the vesting schedule on that forfeited amount, provided you either did not take a distribution from the plan when you left or you return the full amount of any distribution taken that was subject to a vesting schedule.
Please see your Summary Plan Description for more information about what amounts would need to be repaid and how long you would have to make that repayment.
You can learn more about how vesting works and the types of schedules that might apply to your situation here.