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I recently became eligible for my company's 401(k) plan. The company financial adviser has been chasing me down for over a month to file and I've kept waving him because I was job hunting and had no intention of staying.

He did say that I didn't need to contribute to it, but that I needed to at least fill out the forms and indicate that I wouldn't be contributing at this time. Additionally, he said the company makes small contributions regardless of if I put in none.

Well, I put in my two weeks last week and the CEO came up to me today and mentioned the 401(k) paperwork. I reminded him that I didn't see the point since I was leaving and he strongly requested that I fill it out anyway. When I look at my paycheck, it seems that the company has contributed an nontaxable amount of around $65 (not out of my income, just a company contribution).

While I don't mind simply filing out the paper work, I'm wondering if there is any hassle(s) I should be aware of by filing out my first 401(k) for $65 and leaving in a week. If it's going to be some tax headache down the road for me, I'd rather push back on the CEO and restate that I'm leaving in a week and this isn't worth my time.

Note: If it matters, the forms are for a Schwab Personal Choice Retirement Account (PCRA) w/ Limited Power of Attorney (LPOA).

  • Are you aware of a vesting schedule at your current company? – Michael May 15 '17 at 20:54
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    I would check to see if there is a vesting schedule because if you are 100% vested starting when you're eligible, then it'll be worth your time to fill out the paperwork because it's free money for you (however little it might be). – Michael May 15 '17 at 20:56
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    You're probably spending more time thinking about this and typing this question than the forms would take to complete. Are you sure it's time that's your main concern? If you're content to leave with bad blood with the CEO over completing a form, more power to you. – quid May 15 '17 at 21:03
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    No, there is no great future burden. You're going to fill this out, take ownership of the funds in the account then roll the balance over to either your new employer's 401(k) or to your own IRA. – quid May 15 '17 at 21:07
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    When I was your age, I ignored that guy. If I knew what I know now, I'd be at his cubicle at 7:59am, signed papers in hand, and at 8:02am I'd be at HR telling them to put 100% of my salary into the 401K until it caps (which it won't in a week) starting with last paycheck if possible. Quite seriously, I did exactly this the moment I realized what a 401k was. There's never been a bit of tax paperwork associated with my existing 401k. There probably will be when I reach age 69-1/2 but I'm not worried. – Harper - Reinstate Monica May 15 '17 at 22:08
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I would check to see if there is a vesting schedule because if you are 100% vested starting when you're eligible, then it'll be worth your time to fill out the paperwork because it's free money for you (however little it might be). As for tax implications, there are none for you since you never contributed anything (401K contributions are not mandatory). However, they are probably chasing you down because they need paperwork filled out for everyone who is eligible in the event there is an audit of the company's benefits plan.

I don't see any apparent harm in filling it out.

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Some companies will automatically enroll you in their 401(k) plan as soon as you are eligible unless you explicitly opt-out, which may be what they're trying to get you to do.

If you don't want to mess with the 401(k) because you won't become vested and/or the match you'd get isn't worth it, then exclude yourself from the plan.

If you do want to be in the plan, then future activities you'll have to deal with are:

  • rolling the plan to an individual IRA or new company's 401(k)
  • setting up a beneficiary
  • other administrative stuff with the plan provider.

Only you can decide if it's worth your time to get a match or other contribution.

Alternatively, the fact that the CEO is personally involved suggests that it's a small company, and they are trying to save themselves some paperwork by not enrolling you and having to file more paperwork when you resign.

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