401(k) Rollover Plans
Help your employees with a 401(k) rolloverIf you have an employee that is leaving your company, one of the decisions they will have to make, if they have a 401(k), is whether they want to do a 401(k) rollover or not. What the employee will ultimately decide to do with their 401(k) depends on their situation at the time they are leaving their employment.
As an employer, you will need to give them 401(k) rollover information and a 401(k) rollover list to help them find 401(k) rollover providers. An employee only has a few options of what to do with their 401(k) when leaving their job. If an employee does not have another 401(k) readily available at their new job, they may opt to permanently or temporarily leave their money in the account it is already in until they get a new account. When determining what they can do with their money, employees have the following options:
1. Rollover or transfer their money into their new employer's 401(k) plan.
2. Withdraw the 401(k) funds and then rollover the funds directly into an Individual Retirement Account known as an IRA.
3. Cash out the 401(k) account instead of putting it in a rollover and face paying taxes and a 10% penalty.
Put employees in touch with an investment firm that can handle a 401(k) rollover
Give your employee information on financial planning for a 401(k) rolloverFinancial planning information can help your employee understand not just the options for a 401(k) rollover, but the penalties and taxes from the IRS if they should decide to choose an early withdrawal.
Internal Revenue Service website has a variety of helpful information regarding taxes and plan participant retirement plans. The American Association of Retired Persons, (AARP) provides information and calculators so that an employee can calculate how much they will need for retirement.
Put your employee in touch with a 401(k) rollover provider directly for assistanceEmployees need to be able to contact a 401(k) provider directly or have information at their fingertips to find companies that handle 401(k) rollovers. This will make their transition upon leaving easier for both you and the employee.
- Employees really need to be given enough information in order to make a wise decision regarding what they do with their 401(k) money instead of just simply opting to do nothing with it when they leave. The employee needs to know that in 2005, the automatic IRA rollover law was created for employees that are leaving their employment and have between $1,000 and $5,000 in their 401k. Under this law, if the employee chooses to not do anything at all with their 401(k), the money is automatically rolled over into an IRA. In the event this should happen, the employee has no control over what type of account their money is placed in and can not prepare for retirement in a way that adequately serves their financial needs.
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