Can a plan sponsor limit the time an ex-employee is allowed to keep their money in the retirement plan?

Unfortunately, no.

The plan documents and provisions don’t specify any ways to limit how long employees can keep their assets in a plan after leaving the company. Additionally, neither the Department of Labor (DOL) nor ERISA law provides a mechanism by which employers can require ex-employees to roll their assets out of the plan.

ERISA guidance, which created retirement plans, was developed with individuals’ assets in mind. Therefore, an individual—whether actively employed or an ex-employee—has the right to maintain their assets in the plan if they believe doing so is the best option to protect their funds.

Suppose a plan sponsor prefers ex-employees to remove their assets from the company retirement plan. In that case, they need to develop a procedure to persuade these employees to transfer their holdings by regularly reminding them that they can choose. Keeping this information in mind increases the likelihood of employees transferring these assets to alternative options. These reminders should begin immediately upon the employee leaving the company. Companies that utilize their exit interviews to suggest employees transfer their retirement assets have a much better success rate than those that request the transfer months later.

Call us to learn how Plan Notice can help you communicate with both active and ex-employees. Plan Notice not only supports the plan’s required communication, but we can aid you in reminding ex-employees about the options they have to transfer their assets. Additionally, because all communication from Plan Notice is tracked for compliance reasons, you can be assured that your ex-employees are receiving the information.

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