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Asked 5/25/2009

How long does a company have to release a former employee from a 401k plan? The funds in this 401k plan should be available for withdrawal or to roll over to an IRA, I'm wondering how long it should take (or legally can take) for the availability.

I was terminated from my company nearly three weeks ago. Since then I've received the last of my expected paychecks from the company. The Benefits department of the company has been notified that I no longer work there and I have asked on three separate occasions for them to "release" me from my 401k plan. Please let me know what steps should be gone through to accomplish this. Thanks.

 
 
 
 
 
Answers

Answer 1/6 - Submitted 5/26/2009

It often takes them a while (3-4 weeks) to send the information from your last paycheck to the plan administrator.. this usually notifies their system you are terminated.. they will then (most likely) be able to close the account for you...
Did you be sure to ask that distribution is immediate? It usually is but many companies will make you wait 6 months.. some even until the beginning of the next year. Each company is different, and the plan document will outline it all... If it is that the administrator does not yet have your termination date.. that should happen soon... or your former company can call that date into them....Keep calling them.. you may be able to request distribution over the phone, however most companies require signed paperwork.

 
 

Answer 2/6 - Submitted 5/29/2011

While a company has certain requirements to follow to send your final contributions to your plan, the timing of a distribution is not so easy to answer.

401k plan records can be kept in a number of different ways. In many plans the individual account balances are calculated daily at the end of each market day. In this case, you could expect to be able to take a distribution rather quickly, since your final balance would be known quickly.

Other plans are not balanced daily, but rather monthly or quarterly, for example. When that is the case, it can be a longer wait to be able to take your final balance as a distribution, although most record keepers will allow you to take a distribution before the next valuation period and they will balance the plan (leaving your balance 0) after that.

 
 

Answer 3/6 - Submitted 5/29/2011

Most 401(K) plans have a very limited amount of time before you can make a withdrawal or initiate a roll over. In many cases, you can get to your money within a couple weeks after termination. However, this can sometimes depend on the balance.

Some companies will automatically cash it out and issue you a check if your 401(K) is less than $3000-5000. Others require your vested balance to be over this amount, and of course you'll lose any contributions made by your employer if you were not fully vested in their money.

The biggest mutual fund companies managing retirement plans usually have automatic processes in place to cash out 401(K)s quickly and without much effort. Vanguard, Fidelity, Schwab, and a few others are fairly simple to deal with. If your plan is managed by a lesser known entity, then other rules may apply. You should always consult your employer's Human Resources department to find out the specifics, or to get further guidance on where you can get answers about your plan.

 
 

Answer 4/6 - Submitted 5/30/2011

It may vary a lot, depending on the company policy.

Usually it doesn't take more than one month, but in some cases in may take up to a year, which I hope will not be your case.

 
 

Answer 5/6 - Submitted 10/21/2011

ERISA regulations re 30 day withdrawal of 401K

 
 

Answer 6/6 - Submitted 10/25/2011

Often Human Resources Departments report terminations to 401k plans on a monthly basis. I would suggest looking at your last statement, it will have contact information for the 401k administrator. You can reach out to them directly, most have a toll free number for customer. Advise them that you are no longer with the company and wish to close the account, additionally you will need paperwork sent to you to complete for a distribution. Many companies will e-mail you this paperwork. i would also suggest you speak to either a financial advisor or tax professional, if you are under the age of 59 1/2, there will be tax implications for taking an early withdrawal. A financial professional can provide you with tax free alternatives where you will have control of your money.

 
 
 
 
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