Meltdown 101: How Layoffs Affect Retirement Plans
CANDICE CHOI, AP Personal Finance Writer
Q: What happens to the money in my 401(k) or pension after I’m laid off?
A: If you have less than $1,000 in your account, the company can hand the money over to you. Unless you notify them of your preference within 60 days, it can write you a check or roll the money over into an IRA under your name.
For amounts between $1,000 and $5,000, the company can roll the money over into an IRA, but cannot make a cash distribution without your consent.
For 401(k) accounts valued at $5,000 or more, the company can’t touch the money without your consent. The money stays in place unless you request otherwise.
For pensions worth more than $5,000, some companies may pay lump sums. Otherwise, you’ll start getting payments when you reach the plan’s retirement age, usually around 65, said Dallas Salisbury, president of the Employee Benefit Research Institute.
If you’re not getting payments until retirement age, it’s important to keep former employers up-to-date on address changes. Companies are required to file pension records with the Social Security administration, but it’s still possible your contact information may be lost, Salisbury said.