Do the employer match contributions to a 401k before they are vested go into the investments that are selected for the employee contribution?

  • I would guess so, but have you asked your HR department? – keshlam Oct 7 '14 at 16:50

I have worked with several companies, the vesting investments were handled two different ways.

1) Pre-Enron: All the matching funds were invested in Company stock. We couldn't sell those shares until we retired or closed the account when we left the company. We could also put our money into the company stock, but that wasn't advisable. Eventually they did allow people over 50 or 55 to move existing matching funds into other investments.

2) Post-Enron: The default case was for matching funds to be invested in the same proportions as the employee investments. In one company it was possible to set percentages for employee funds, employer match funds, employee dividends, employer dividends.

HR should be able to answer your question regarding your options.

After the collapse of Enron, the US government opened up many of the policies regarding investments within 401Ks. Locking into company stock was forbidden. They also standardized the rules regarding how long a company has to fully vest the matching funds.

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  • Pre-Enron is not a "different" way, it is now illegal and thus irrelevant. – littleadv Oct 7 '14 at 18:44
  • I will add that it is illegal. Put I have know people who didn't realized it changed. They still put everything into company stock. – mhoran_psprep Oct 7 '14 at 19:08

Generally, it depends. You should check with the plan provider. I would expect (as I've seen on all my 401ks since I started having them) that you will be able to either have them invested per your general investment selection, or be able to select investment options specifically for the match portion.

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  • My question is about whether they are invested before they vest, not whether I can choose how to invest them. – Daniel Oct 7 '14 at 17:06
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    @Daniel then the answer is yes – im so confused Oct 7 '14 at 17:13
  • If you can chose how to invest them - doesn't it mean that they will be invested? Otherwise what are you chosing... – littleadv Oct 7 '14 at 18:39
  • @littleadv I understood this answer to be talking about employee match after it is vested. – Daniel Oct 7 '14 at 21:20

It depends.

There are two factors here: employer match vesting and contribution source elections.

I have worked for both types - employer match vests immediately and where it has a vesting schedule.

I have only had 401k accounts that allow you to identify contribution elections based on the source (rollover, employer match, employee contribution). Thus, you have control either way.

If a 401k account exists that does not allow you to separate your elections by source, only then would this question come into play. In that instance, you don't get to select differently anyway so it doesn't make sense.

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