Why can employers force small 401(k) accounts when a worker leaves?

Tom Werner | Digital Vision | Getty Images

If you left behind a small 401(k) plan account at a previous job, your previous employer likely moved those funds out of the plan. Experts say the move could hurt your retirement savings in the long run.

Current law allows employers to “force” 401(k) accounts worth $5,000 or less if the owners leave the company, perhaps for another job or due to a layoff. Smaller balances, under $1,000, can be cashed out, while the remainder can be transferred to an individual retirement account.

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