For an example if it takes three years to become fully vested
You might have to work there one year and then 30% of your employer match is yours if you quit.
After two years you might be 60% vested and get that percentage of employer match if you quit and then after three years you are fully vested and everything that your employer contributed is now yours if you quit.
Since you are 100% vested everything your employer contributed is yours if you quit tomorrow.
1 year 30% vested
2 years 60% vested
3 years fully vested
I am surprised that your employer is allowed to set a mandatory minimum. Are you sure this is not just an automatic amount that they set and you have the option to lower it?
It sounds like your employer contributes 10% no matter what.
The way a match USUALLY works is that your employer will contribute up to a certain percentage if you also contribute.
Let's say they match dollar per dollar up to 5%
So if you put in 3% of your pay they will put in 3% match
If you put in 5% they will put in 5%
If you put in 6% (or more) they will still only put in 5%
Many places will match 50 cents on the dollar up to a certain percentage say 5%.
So if you put in one dollar they only put in 50 cents.
So your 5% in reality works out to be a 2.5% match from your employer.
This is an incentive for you to put in a percentage of your pay at least up to what they match. If they offer a 5% match and you only put in 3% it's like you are passing up free money.
100% Vesting is good! That mean's you are entitled to your employer's matching contributions immediately upon receipt. That means if you leave in 2-3 years, anywhere you move that 401k, you will take all the funds with you. Different than if you had a 20% vesting schedule per year where you would only get a certain percentage of the employer match if you leave before 5 years. Your personal contributions are always 100% vested and yours!
401k's are option meaning you shouldn't be MANDATED that you contribute 6%. You can opt out and not participate at all, which I don't recommend. Basically what your employer is saying is that to get a full 10% contribution from your employer, you need to contribute 6%. Based on how you worded it, this might mean if you don't contribute 6% at least you won't get any kind of match. 10% match is really good, and I hope you take full advantage of that!
If you increase your contribution from 6-10% you won't receive any additional matching contribution, but will still receive the 10% they are offering.
I've never known that 401k are mandatory participation by the employee. Nor is employer contribution a mandatory requirement. But many employees do participate - it's their retirement account and it is to their benefit to join. Also, it is a bargaining chip for employers to contribute a %age to the employees account so that they get the best employees.
Vesting means that you are entitled to the money you contributed to your account if you leave the company. When you are partially vested, you are only entitled to the funds YOU contributed. When you are 100% vested, you are entitled to the funds YOU contributed PLUS the funds your employer contributed.
http://www.ehow.com/info_7988349_vested-...
They are really trying to treat you right..
BUT
What a lot of people are rapidly discovering is that the companies handling the 401(k)s are trading your shares in mutual funds for US treasuries... which is theft.
Consider just banking with a credit union and putting your own 6% into a savings account every time you get paid... at least you will have it.
Stock market is expected to collapse in a short few months. See below.
For my 401k through my employer it is mandatory to contribute at least 6% of my pay to the 401k. My employer then contributes 10% of my pay themselves to the 401k.
If I increase MY contribution from 6% to 10% of my pay would this be matching my employer? I've heard this term about employer match but do not fully understand it.
Also, the plan is 100% immediately vested. Not sure what that means either. This is my first job.
