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I just started a new job and I would like to enroll in the 401K plan to start saving for my retirement. I'm 30 years old and this is the first job that has an 401K option for me. Can someone please explain what the below text mean. I am new to this and am very confused.
Discretionary match commences first of month following 6 months of employment.
Company contributes $0.50 for every dollar that you defer, up to the first 6% of your base pay.
Vested at 100% in both the employee deferral and employer matching contributions.
May rollover funds from another qualified plan at any time.
The company match starts after you’ve been there for 6 months. You can probably still save on your own though before that time.
If you contribute 6 percent of your salary, they will contribute another 3 percent.
The funds vest immediately. You always get your own contribution, but sometimes companies can take back their contributions if you leave before the money vests. In your plan, if you leave at anytime, the money is still yours.
They don't have to offer a company match, but they do, hence it is a "discretionary" match.
"$0.50 for every dollar that you defer"
Let's say you earn $50K per year. If you defer (contribute to your 401k pre-tax) 1% ($500 for the year), then the company would have contributed $250 to your 401k during the year.
"up to the first 6% of your base pay"
You can perhaps defer 10% of your salary ($5000 for the year). I've done more than that some years. However, they will only match the first 6% ($3000) for a maximum match of $1500.
"Vested at 100% in both the employee deferral and employer matching contributions."
This is a good thing. Sometimes, company reserve the right to take back their matching if your employment was terminated within a certain period after they made the contribution. They want to reserve the match for people who stick with them. One year vesting would mean that the matching contributions would be clawed back from you should you leave before that matching contribution was in your account for a full year.
"May rollover funds from another qualified plan at any time."
If this is your first retirement account then this doesn't apply.
do the 6% minimum contribution on each pay check or else you don't get the 3 % company match for that paycheck
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