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New Member
posted Oct 22, 2023 6:55:26 AM

Non vested Monies in 401k

How does the IRS treat non vested 401k monies that are retained by the employer?  Are they taxed or removed from the Total Taxable Amount?

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1 Best answer
Level 15
Oct 22, 2023 7:53:43 AM

The money doesn't become yours until it vests, so when you leave the employer, the non-vested money is money you never had.  With respect to your 401(k), it simply disappears from your balance; it's not a distribution.  You aren't taxed on money that was never yours.

2 Replies
Level 15
Oct 22, 2023 7:53:43 AM

The money doesn't become yours until it vests, so when you leave the employer, the non-vested money is money you never had.  With respect to your 401(k), it simply disappears from your balance; it's not a distribution.  You aren't taxed on money that was never yours.

New Member
Oct 22, 2023 10:27:18 AM

Thank you so much for the clarification.  I suspected that but could not find that specific information within the irs directions.