In your employee exit interviews, should you discuss the retirement plan?

You definitely should.

When an employee has decided to leave the company, it’s best practice to discuss their transition and learn more about their experience working for you. During this interview, human resources can attain honest, constructive criticism about ways to improve the work environment for the organization’s long-term benefit. Additionally, the exit interview is a critical time to inform the departing employee about their rights and responsibilities regarding any post-employment benefits. Finally, one of the critical areas that should be discussed is any assets the soon-to-be-ex-employee may have in the company-sponsored retirement plan.

What are some of the key points to discuss regarding the retirement plan?

First, explain to the participants their right to withdraw their assets. The benefits administrator can review the opportunities for the departing employee to either roll their assets into an individual retirement account (IRA) or a 401(k) if their new employer offers one. By addressing this issue and providing employees with a detailed process by which they can roll their funds, the chances of them doing so increase significantly. The benefit of the employee moving their money is that it reduces the plan’s liability to the participant. The exit interview is also a good time for the HR department to explain the costs and tax consequences if the participant withdraws their funds rather than rolling their assets into another tax-qualified plan.

If the participant decides to keep their assets with the company’s retirement plan after leaving, the HR department can review the participant’s communication requirements to help to maintain these assets. Informing the departing employee that they need to remain accessible for plan communications and emphasizing how important it is to notify the plan of any changes to their contact information helps reduce the risk of the ex-employee going “missing.”

Additionally, having these expectations documented and provided as part of an exit package is beneficial. A sign-off on this process can prove the company’s efforts in the case of a DOL, IRS, or attorney investigation. Finally, if the ex-employee is aware of who to contact if they don’t receive regular communication from the plan, it allows them to reach out to the proper people to ensure they get all pertinent information that could affect their assets.

Having these conversations when an employee leaves the company improves the likelihood that the employee won’t become “lost” and, therefore, an administrative burden.

If HR exit interviews are not a priority for your company, call us at Plan Notice. We’ve developed a proprietary system that helps you manage ex-employees, provides ongoing communication and prevents participants from becoming lost. Plan Notice offers an audit trail of all communications and follows the DOL best practice for locating a participant who doesn’t confirm communication receipt. Additionally, when you engage Plan Notice, we indemnify the plan and plan sponsor of any costs or fines imposed by the DOL, IRS, or an attorney for missing participants or lack of proper communication with any active or ex-employee who has assets in the retirement plan.

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