Ex Employees: Where to Allocate Funds

Best Strategies Explained

‍

Today we we would like to talk about ex-employees, where to allocate funds, and the best strategies

In formulating a sound strategy for ex-employees' involvement in company retirement plans, it's crucial to consider each individual situation. Certain ex-employees may benefit significantly from maintaining their assets in the company-sponsored 401(k), as the administrative fees could be lower due to the overall plan's total assets. On the other hand, moving the funds to an IRA offers a wider range of investment possibilities and disentangles the employee from any company plan changes.

If we are unable to verify receipt or if the participant is deceased, we conduct a similar process for the beneficiaries at an additional cost of two hundred dollars, also charged directly from the participant's account.

From a plan sponsor perspective, retaining participant assets can help in fee negotiations and boost the overall plan value. If participants contribute to plan fees, assets of ex-employees can offset some costs, thus lowering the financial strain on active employees.

Encouraging ex-participants to roll their funds out can decrease administrative responsibilities. Keeping track of ex-employees adds administrative burden and potential costs, as plan sponsors must ensure continued proper communication and noticing for these individuals.

It's essential for plan sponsors and plan operations committees to coordinate and decide on the best course of action. If they choose to retain ex-employee assets, a procedure for consistent communication must be established. If they opt to encourage roll-outs, a supportive procedure must be developed to assist employees in the process.

For more information on where to allocate funds with ex-employees, contact us today.

‍