How a Merger or Acquisition affects your 401(k) Plan
By: Conor O'Malley
From complete buyouts to Mergers & Acquisitions, companies are always on the move. In most cases, this opens up opportunities for professionals like yourself! It could be a new role, new coworkers, new ideas-- some pretty exciting additions to your career. Lower on the priority list is usually the retirement benefits, but this unique transition could be the difference of tens to hundreds of thousands in retirement savings. In this article, we’re going to break down how an employer transition affects your 401(k) and how to benefit from it!
For years, our team of CFPs have helped countless families in times of job transition and made a significant impact on their retirement savings-- let’s dive into how:
Will my 401(k) transfer to the new company?
In the majority of cases, your account will move from your old 401(k) provider to the new one. Sometimes, though, the new company uses the same provider, so you get to keep the same login and account information.
In both cases, more often than not, the plans differ. Different employer matches, fund options, contributions, etc. It is extremely important to understand the new plan before making any decisions or changes to how you save for retirement.
Do I have to transfer my old 401(k) into the new one?
The simple answer is NO. Many people think that it’s mandatory to keep your 401(k) savings in the new employer plan, but as a matter of fact, you can roll it out at little to no cost (and no tax consequences!!). This move is considered a 401(k) rollover.
If the acquiring company decides to move your old plan into their current one, you may have the option to follow suit and your savings go into the new plan. Alternatively, you could transfer the funds into an Individual Retirement Account (IRA). This decision depends on factors like the new plan's terms, investment options, and fees compared to those of an IRA.
Estimating retirement savings becomes crucial in such scenarios. As an individual planning for retirement, you need a clear picture of how much you should have for retirement and whether the changes post-acquisition align with your financial goals. Evaluate the new plan's investment options and fees to ensure they are similar or possibly better than the previous plan-- if not, it may make sense to go that alternative route of a 401(k) rollover.
Will I still get the Employer Match?
No matter which option you choose, as long as you continue to contribute to your current 401(k), you’ll receive the employer match (if your company offers one). The 401(k) rollover option simply transfers your current 401(k) savings into an IRA, in which you can allocate the account with more diversification and fund options. If you choose to do so, future contributions will be with the new employer plan, receiving the matching contributions. Keep in mind, although, these future savings will be constrained to the plan’s specific options.
Closing Thoughts
When your employer is acquired, stay informed about the changes to your 401(k) plan. Evaluate the options available, including the possibility of a 401(k) rollover, and consider consulting a financial professional to ensure your retirement savings align with your goals.
