Dumb 401k question.
 

Pardon the ignorant question. I'm dense as a tree stump and my google-fu has not exactly satiated my curiosity. Spirits profile page mentions a direct contribution of 11% rising to 15%. I take it that means the company simply puts that percentage of your pay into your 401k. It's not a "match" like most regional 401k setups?

Correct they will put that amount in whether you put any in or not.

Thanks. I figured that's what it meant. I just need things spelled out for me. Usually with small words. :)

You can also elect to contribute a non matching portion of your check as well. (sorry if this is a DUH statement)

correct. the term you're looking for is Direct Contribution (vs match)

It’s worth noting that it’s a 5 year vesting schedule for the company contributions. For anyone using NK as a stepping stone, it’s going to be less than the 11% if you leave before 5 years of service.

6 years completed (7th year pay) to be fully vested

This. 20% vesting per year after 2 years completed. (2 years completed = 20% vested, 3 years completed = 40%....etc.)

So say the company puts in 16K your first three years at NK for a total of $48K and you get a total return of 15% on that money due to conservative stock investments for a total of $55,200. Then you leave after 3 years, your saying you'd only take 40% of that money with you in your 401K (so a total of $22,080) and the company gets to keep the rest?
Just trying to understand.
Thanks

It’s a simple graded vesting schedule. So yes, if you leave after completing 3 years, you’re entitled to take with you 40% of the company investments and the rest is forfeited back to the company.

Usually the company is required to transfer the “forfeited” funds back into the program for existing employees; to fund their plans, or plan costs, as reallocated forfeited funds.

The vesting should be on the company contribution alone. If you contribute additional funds to your 401(k) you would(should) still be entitled to your contributions and all returns. That is, unless y'all hired the same guys that write our contract language.

If company put in $48,000 and you were 40% vested you’d walk away with 40% of 48k. That’s it. You are always 100% vested in your own contributions. After all it’s your own money you put in. Spirit is 6 years to be 100 % vested . Meaning you keep 100% of all spirits monies they contributed .

Yes. And remember, the company does not put in “money” they buy “shares”. So they own rights to a percentage of the shares, not the money at the time of transaction.

So you need to think of it as: If you leave after 3 years, you keep 40% of the total shares and the company keeps 60% of the total shares. Not “the company put in $20k, so they get 60% back of the $20k”

So IF the market increases, the company will be taking back shares which have increased in value over that time. Conversely if they decline in value, they take back 60% of the shares they bought which are worth less than when purchased.

Otherwise you get a scenario where:

Bob works for a company that has a 5 year vesting schedule. 20% a year to 100% after 5years. At 3 years Bob has $80k in total company contributions but the Market takes a nose dive and his total value is now $50k. The company let’s Bob go. Bob is 60% vested in the company contributions, company still owns 40%. The company can not say “ok, we gave you $80k, we get 40% back, so that’s $32k for us”. Leaving Bob with $50k market value minus company snagging 40% of contributions, so Bob gets $50k-$32k= $18k for Bob.

Instead, the company takes back their percentage of shares purchased with their contribution in relation to their vesting plan. So instead of the company snagging $32k worth of shares, they will get 40% of the shares of the new value of the fund which is $50k, so they get $20k and Bob keeps his vested 60% of shares which is $30k. This is all based on Bob contributes nothing, since he clearly keeps 100% of his contributions.

This is an extremely long winded example of saying the company will take a percentage of the non vested gains back, as well as they take a hit on any non vested losses as well

Correct. They will take the 40% and the earnings from that investment, whatever the dollar amount is. Or they will
Take 40% and absorb the amount of
The loses
Whatever amount that is . Basically work here 6 years and you got a lot of free money from spirit .. and since we are in a bull market (presently) some decent earnings as well

After a little confirmation research I can say, "that doesn't seem right, but I guess it's how things work."

Where are you getting a “conservative” 15% return rate?

It seems clear he meant 15% over 3 years.

Doh, quick read on the hotel shuttle strikes again!