Employer Plan Rollover

Employer Retirement Plan Rollover Basics

When you leave a job, your employer-sponsored retirement plan balance doesn’t have to stay with your former employer. You have options to roll the funds into an IRA or a new employer’s plan, giving you more control over your retirement savings and investment choices.

Types of Employer Plans That Can Be Rolled Over

• 401(k) plans: The most common private-sector retirement plan.
• 403(b) plans: Used by schools, hospitals, and nonprofits.
• 457(b) plans: Available to government and some nonprofit employees.
• Profit-sharing plans: Employer contributions based on company profits.
• Money purchase plans: Fixed employer contribution plans.

Rollover Options Explained

Leave it with your former employer: If your balance exceeds $7,000, most plans allow this. Your money continues growing tax-deferred, but you can’t make new contributions.

Roll over to an IRA: This option offers the most investment flexibility. You can choose from thousands of funds, stocks, and bonds. IRA fees and options vary significantly by provider.

Roll over to your new employer’s plan: Consolidates accounts for simpler management. Some plans offer institutional fund classes with lower fees. This option also allows 401(k) loans against the rolled-over balance.

Step-by-Step Rollover Process

1. Contact your former employer’s plan administrator: Request rollover forms and instructions.
2. Open your receiving account: Set up an IRA or confirm your new employer accepts rollovers.
3. Request a direct rollover: The distribution check should be payable to the new custodian, not you.
4. Submit required paperwork: Both plans may require forms.
5. Confirm the transfer: Verify funds arrive and are invested appropriately.

Important Deadlines

If you receive a check made out to you (indirect rollover), you have 60 days to deposit it into a qualified retirement account. Miss this deadline, and the entire amount becomes taxable income. You may also owe a 10% early withdrawal penalty if you’re under 59½.