Was your qualified plan terminated? It happens all the time. According to FreeERISA, a qualified plan database provider, over 20,000 plans were terminated between 2014 and 2015.
Employers terminate plans for many reasons. It’s often not the employer trying to make life more difficult for the employees, they set it up to help in the first place to help their employees. The fact is 401k’s, Profit Sharing, Pension and other qualified plans are expensive and complex to run. For some employers it just makes sense to end a bad relationship with the qualified plan world.
The next question is, “What to do”?
Your options generally include performing a rollover to a traditional IRA or doing a distribution from the plan. If you do a distribution from the plan you must pay taxes and if under 59 1/2 or under the Early Retirement Age if your plan provides it, paying a penalty of 10% on top of the taxes you will owe. This can be considerable loss! You can learn more about the potential cost of a full distribution here.
You may also roll over your plan to a Roth IRA if you have a Roth 401k or by doing a conversion. If you perform a conversion you will still have to pay the taxes but not the penalty.
Generally it makes sense to roll over your plan assets to a Rollover IRA. Rolling over your qualified plan to a Rollover IRA provides continued growth on a tax deferred basis. Generally there is no cost to rolling over to a new IRA but your past provider may charge an exit fee, which we believe in our opinion is unfair if your plan has been terminated.
Not all IRA’s have automated investment advisory including research, monitoring and re-balancing, as a matter of fact most plans require you to do all the work. One of the key benefits of AmericasRetirementPlan.com is that we do all the research among a wide variety of mutual funds and ETF’s which fit our clients situation and our limits on portfolio construction such as availability through TD Ameritrade, low cost, no trade fees and a past history of being managed to achieve the results we insist on.
Want to know which is better, a rollover to a traditional Rollover IRA or a Roth IRA? You can learn more here.
If you wish to get started with a roll over of your 401k, profit sharing, pension or other qualified plan to an IRA, you can easily do it here!
Open your account: Choose Retirement on the following page. Complete your onboarding experience and after choosing Invest Now, you will be given the choice to open your Rollover Account.
Reach us 24 hours a day at 800-871-0521 x 2. Just call us and we can walk you through what you need to do to get on track. We can guide you to the information you need to know on the website or look up information on your plan. Then, we’ll set up your Rollover Call with your plan provider and one of our Rollover Specialists to make sure everything is done just right. At this stage one of three things will happen:
- Your Plan Sponsor / Recordkeeper will transfer funds directly to TD Ameritrade and we’ll notify you once received.
- Your plan sponsor will mail you a check. We will send you, Federal Express, directions on how to handle your rollover from there.
- Your plan sponsor will email or mail you paperwork to fill out to return. In this case, call your 401k rollover specialist at AmericasRetirementPlan.com and we’ll help you with the paperwork and the remaining rollover.
That’s really it! For more on rolling over your plan see locating your 401k in this section.