Molly Ivins would use the term "peckerwoods". My own word for the people who
manage my company's 401(k) is somewhat less flattering. Consider this a cautionary
tale in dealing with your own.
Toward the end of last year, I
realized something looked different on my check - the amount deposited in my
account went down a little. I investigated, of course. What has happened
everywhere else I've worked is that toward the end of the year if you hit the max
amount on your pre-tax 401(k) contributions, they just stop putting money in until
the end of the year and pay it out to you instead. It's a handy bit of extra year-
end. Here, instead, they keep putting the money in your account, only now it's put
in after tax, so you get a little less in your check because of the tax
bite.
What I decided to do was to withdraw the after-tax amount as a
lump sum, having had an expensive December (new roof, Antarctic trip). Since it is
after-tax money, you can do this without any sort of penalty.
A few
days ago, I got a note in the mail stating that company contributions to my 401(k)
had been reinstated. This was a surprise to me, since I hadn't had any idea they
had ever stopped. (Yes, my company contributes to our 401(k) accounts, just
another reason I like this place.) I called to see what was up. Apparently, if
you've worked here less than 5 years and make a withdrawal for any reason,
including after-tax monies, they stop the company contributions for 3 months.
This strikes me as nonintuitive, and the sort of thing their
personnel really ought to have told me when I talked to them about withdrawing the
money. Note that I did not call up asking to withdraw; I called to see why my
check was smaller and made the decision to withdraw in consultation with one of
their people.
The consultant I spoke to informed me this practice is
documented in the Summary Plan Description. No doubt it is, but that's a long
document in teeny-tiny type and even if I Had read it as carefully as I ought
(instead of skimming, as I did) I'm not sure I'd have caught that salient point,
much less remembered it months later when the document was at home and I was on
the phone to these people at work. Further, I can't see the point when it's a
matter of after-tax monies, which shouldn't be different than money in any other
savings acocunt.
I asked him to figure out how much money I didn't
get as a result of this, and it turns out to be substantial, $870 or so. Of
course, I can't say I lost the money because it's money I didn't have to begin
with, just a nice little extra benefit. Still, that's a large impact when you
remember that I'm only 37 and that's money that won't be compounding for me to
retire on in 20-30 years. He's going to escalate the matter, but I don't have much
hope of anything coming of it.
Moral: when they say there are no
drawbacks to taking out your own money, always ask a *lot* of questions and
remember taxes aren't the only possible penalties.