Can my former employer force me to move my 401(k)?


Q. I have more than $80,000 in my 401(k) from an employer I recently left. I received a letter saying I need to move my money to an IRA. If I am reading the IRS rules correctly, because of the amount of money involved, they can not force me to move my money, and without my consent they can not arbitrarily move it or issue a disbursement check. I was with this company for 24 years and fully vested.
— Still working

A. There are some specific rules you should be aware of when it comes to leaving a 401(k) with your former employer or moving it to an IRA.

So called “force out” provisions and what the plan allows are contained within the specific plan’s document.

The law says your employer can’t force out vested amounts over $5,000, said Joseph Sarnecki, a certified financial planner with U.S. Financial Services in Fairfield.

“Whether the overall plan size is $80,000 or $80 million, this is the same. It is based on the participant’s vested account balance,” he said.

But there are times when an account becomes “immediately distributable” based on the plan’s documents.

“Under 411(a)11, the plan could specifically authorize force outs at or after normal retirement age,” Sarnecki said. “In addition, this can be done upon the death of a participant, through a Qualified Domestic Relations Order (QDRO), or to non-responsive participants if the plan is terminating.”

You should ask your plan why it says you need to move the money, but whatever the reason, your best bet is to set up an IRA and roll over the funds from the 401(k) to a new account. You’ll have more investment options and most likely, lower fees.

Email your questions to moc.p1597476631leHye1597476631noMJN1597476631@ksA1597476631.

This story was originally published July 23, 2020. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.