Is there a difference between 401(k) matched funds as opposed to non-
matched funds?

I got an inquiry from someone who requested a withdrawal of non-matched
funds. When he got the statement, it showed the withdrawal was from
matched funds. The employer says that, since the employee cashed the
check, it's too late and they won't fix it.

Does it make a difference? If it does, is there a way to fix it?

Thanks for any insight you can give.

Regards,
Stu

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Stu
http://DownToEarthLawyer.com

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On 7/16/21 1:07 PM, Stuart O. Bronstein wrote:

Is there a difference between 401(k) matched funds as opposed to non-
matched funds?

I got an inquiry from someone who requested a withdrawal of non-matched funds. When he got the statement, it showed the withdrawal was from
matched funds. The employer says that, since the employee cashed the
check, it's too late and they won't fix it.

Does it make a difference? If it does, is there a way to fix it?

Thanks for any insight you can give.

Regards,
Stu

I see it's been 5 days and no replies.
I will assume that the reference to matched and unmatched funds is to
the amount of employee contributions that the employer matched and the
amount of employee contributions that were not matched by the employer.
As such, there is no tax difference when those funds are distributed.

The only issue I am aware of is the vesting schedule for employer contributions. The amount of employer contributions is kept separate on
the books because until the employer match vests, the employer can
clawback the amount if the employee terminates for any reason before
reaching the required number of years of employment to vest.

If there is a situation that allows an employee to take a distribution
before the employer contribution has vested, that distribution would
never be identified as coming from unvested employer contributions for
obvious reasons.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
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On 7/21/21 7:29 PM, Alan wrote:

On 7/16/21 1:07 PM, Stuart O. Bronstein wrote:

Is there a difference between 401(k) matched funds as opposed to non-
matched funds?

I got an inquiry from someone who requested a withdrawal of non-matched
funds.  When he got the statement, it showed the withdrawal was from
matched funds.  The employer says that, since the employee cashed the
check, it's too late and they won't fix it.

Does it make a difference?  If it does, is there a way to fix it?

Thanks for any insight you can give.

Regards,
Stu

I see it's been 5 days and no replies.
I will assume that the reference to matched and unmatched funds is to
the amount of employee contributions that the employer matched and the
amount of employee contributions that were not matched by the employer.
As such, there is no tax difference when those funds are distributed.

The only issue I am aware of is the vesting schedule for employer contributions.  The amount of employer contributions is kept separate on
the books because until the employer match vests, the employer can
clawback the amount if the employee terminates for any reason before
reaching the required number of years of employment to vest.

If there is a situation that allows an employee to take a distribution
before the employer contribution has vested, that distribution would
never be identified as coming from unvested employer contributions for obvious reasons.

I've also seen reference to a plan's details that permitted an employee
over age X to move funds out of their 401(k) while working, but only
from the 'employee deposit' side, not the matched.

For Stu's client, there's no consequence aside from the mental compartmentalizing, the feeling there are 2 separate buckets of money to withdraw from. I see the 2 numbers myself when looking at statements,
but give it little thought.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

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