Your old 401(k): Out of sight, out of mind and out of money

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And in November, the financial services industry established a system that automatically moves old retirement accounts into the worker's new employer's plan. He Network Portability Services automatically compares Social Security numbers in workplace accounts, obtains the worker's consent to transfer the money, and automatically deposits money from the old account into the new employer's plan. Employees can check for missing accounts on the network's website using their last name and the last four digits of their Social Security number.

The voluntary network includes plan administrators Alight Solutions, Empower, Fidelity Investments, Principal, TIAA and Vanguard and uses technology from Retirement Clearinghouse. These financial services companies administer and maintain records for employer plans and are expected to encourage employers who sponsor their plans to participate. In addition to helping savers avoid forced IRAs, the network would eliminate withdrawal from accounts with balances of $1,000 or less, said Williams of Retirement Clearinghouse.

“There is no size limit” on accounts that can be moved automatically, he said. “We will reduce the balances to one cent. Most of these plans are collecting balances of less than $1,000, and the sponsor is left with a huge problem of uncashed checks. The industry is plagued with these uncashed checks.”

Workers are free to move their old accounts without a federal network or database, and have several options. The goal, financial planners say, is to keep most or all of the money together, where investments can be coordinated and performance easily monitored. Here are points you should know.

  • If a new employer has a 401(k) or similar plan, the administrator of that plan can usually handle combining your accounts. This would allow you to take out a loan against the account balance, if that option is offered. Loans can only be obtained from your current employer's plan.

  • If a new employer doesn't offer its own plan or you stop working, your old plan can be rolled over into an IRA, a transfer that most financial services providers can handle.

  • If your plan balance is more than $7,000, the money can be left in your former employer's plan. Account holders must register online to obtain statements and manage their investments.

  • Workers with a balance of less than $1,000 will likely find themselves dropped from their old plan. To avoid paying taxes and possible early withdrawal penalties, put that money into an IRA within 60 days. The deposit must cover the entire balance withdrawn from the 401(k), including money withheld for taxes. (That money can be claimed on the account holder's next tax return).

“If the balance is less than $1,000, my advice is not to let it withdraw. You can renew it,” said Jeanne Fisher Sutton, a certified financial planner in Nashville known as 401(k) Lady on YouTube. “Many, many people are losing track of their 401(k) plans, and it's very difficult to find them. If you leave an employer, turn it around and be proactive in managing your account.”

Comerica Bank executive Featherngill finally rolled over her old Wells Fargo 401(k) plan, two years after leaving.



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