401k Forfeiture Contribution

I’m going to be leaving my current company and have a considerable amount of unvested funds in the company’s retirement plan – both employer matching contributions and non-elective employer contributions. Fortunately, the company I’m joining has agreed to “buy me out” of the unvested amounts I’d be forfeiting in the form of a sign-on bonus. The bonus will be taxable and paid as part of my first paycheck but that doesn’t do me a whole lot of good from the standpoint of replenishing my retirement savings. Is there any way I can get the buy-out cash from the new employer to the tax-deferred side of the ledger to replenish the funds that were forfeited? Perhaps some kind of excess contribution to an IRA after I roll the old 401k over? Ideally, I’d like to have the same assets on the tax deferred retirement side of the ledger as I did before I left my soon-to-be former company but I’m not sure if this is possible.

Thanks in advance!



If you are not maxing out the new employer’s retirement plan contributions, you can use the additional wages to increase your contribution. That’s indirect, but the only way you can restore the forfeited contributions. Making excess IRA contributions intentionally is not a good plan, because you will owe a 6% excise tax on excess contributions for every year they remain in the IRA, with no statute of limitations.



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