Employee Transitions with Retirement Assets

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Today we wanted to talk about best practices around Effectively Managing Employee Transitions and their Retirement Assets.

When an employee decides to part ways with your company, conducting an exit interview is a crucial step. This interaction not only allows for constructive feedback but also provides an opportunity to discuss the departing employee's rights and responsibilities regarding post-employment benefits, including assets in the company-sponsored 401(k).

Key points to address in the retirement plan discussion include: The right to withdraw their assets. The benefits administrator can outline options to roll assets into an IRA or a 401(k) plan with their new employer. and The responsibility of staying accessible for plan communications if they decide to keep their assets in the company's retirement plan. By providing a clear process, the chances of them moving their assets increase, reducing the plan's liability to the participant. It's also essential to discuss potential costs and tax implications if the participant chooses to withdraw funds instead of rolling them into another tax-qualified plan.

Having these expectations documented in an exit package, with the employee's acknowledgment, can serve as evidence of your company's due diligence in case of an audit by the Department of Labor, IRS, or during an attorney investigation.

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