If your employer's 401(k) plan is moving from Guideline to a different retirement provider or being terminated, it's important to understand how this might affect any actions you wish to take with your account.
Understanding 401(k) transfers and terminations
A plan transfer (or service termination) occurs when your employer chooses to move the 401(k) plan with Guideline to a different service provider.
A plan termination is when your employer chooses to completely discontinue the 401(k) plan.
What to expect during a plan transfer
If your employer requests to transfer your 401(k) plan to a new service provider, no action is required on your part. Your employer and Guideline will work together to transfer all plan assets.
In order to gather the data and transfer the assets, we will need to pause all changes and transactions, including selecting new investments, taking out loans, or requesting a distribution. This is called a “blackout period,” and you will be provided advanced notice of when the blackout period will start and when it is expected to end. In most cases, you will receive this notice at least 30 days before the start date.
If you would like to make changes to your account or request a distribution (if eligible) from your Guideline plan, you must do so before the blackout date occurs. Otherwise, you will have to wait until your plan is active with the new provider. From that point forward, you’ll work directly with that provider to take any actions with your account.
What to expect during a plan termination
If your employer is terminating the 401(k) plan, Guideline will notify you via email, and you’ll have several options for moving your funds out of the plan. Typically, you’ll be able to request a rollover to another employer-sponsored retirement plan or IRA or request a cash distribution (withdrawal). Keep in mind, you’ll be subject to an early withdrawal penalty for a cash distribution unless you are eligible for an exception.
It’s important that you submit your distribution request as soon as possible, so your funds may be moved according to your preferences. If you do not take action to remove your balance prior to the blackout date, it will be transferred to a third-party provider called PenChecks. Any distribution requests that occur after the transfer, must be completed directly with PenChecks.
Please note, that while you can request the distribution as soon as you receive the notice of plan termination, the distribution will not be processed until Guideline and your employer have completed any necessary testing and/or corrections during the Account Review stage. This process typically takes 3-4 weeks but can be longer depending on the steps needed to address any issues that are found.
If any checks are sent to you, it’s important to cash them as soon as possible. Balances that remain uncashed after 180 days (6 months) will also be sent to PenChecks to avoid delaying the plan termination process.
If you have an outstanding 401(k) loan, you will have 90 days to repay the balance before it will be treated as a distribution. You can find more information on that here.
Timeline for plan transfers or terminations
Plan transfers and terminations generally take around 90 days; however, several variables can extend this timeline. We will work to complete the process with your employer as quickly as possible. However, we must depend on their corporation to ensure all steps are completed in a timely manner to prevent delays.
Rest assured, your funds will remain invested in your elected Guideline portfolio until the plan is fully liquidated or transferred.
If you have any questions regarding the plan transfer or termination, your employer will be your best point of contact. If your employer has questions, they can reach out to offboarding@guideline.com for more information.