While you may be able to keep your 401(k) balance within a plan after leaving your employer, you may not have this option if you have a low balance. The IRS allows employers to add what’s known as a force-out provision that would require former employees with low balances to remove their assets from the plan.

Here’s when you might be affected by a force-out provision and what it means for your account.

A force-out provision is a clause that requires dismissed participants with low balances of a set limit to remove their funds from the 401(k) plan. The minimum amount required can be from $1,000 to $5,000¹ (not including rolled over amounts), depending on the option chosen by the employer.

While Guideline participants will have options on how they want their funds to be moved, those who do not take action will have their balances automatically rolled over to an IRA in their name.

If a force-out provision applies to you, you will not be able to keep your balance within your former employer’s 401(k) plan. You can find out if this provision may apply by reviewing the latest Summary Plan Description available within the Resource Library of your dashboard.

Any applicable forceout provision will be outlined in the section titled “Account Balance Less Than or Equal to $X,XXX.” (The amount listed will vary depending on the employer’s selection.)

If you are impacted by a force-out, you will receive an automatic rollover notice in your email once you leave the employer sponsoring the plan. You then have 30 days to tell us where you would like your account balance moved.

If you do not take action, your account balance will be forced out and automatically rolled over to a Guideline IRA established in your name.

Guideline IRA accounts start at just $2 per month for balances of $10,000 or less in assets or $4 per month for balances more than $10,000.² Similar to a 401(k), there is also an annual account fee of 0.08%.³ You can learn more about how this account fee is calculated here.

If you are subject to the forceout provision and do not want your funds automatically rolled over to a Guideline IRA, you will have 30 days to provide alternative direction. Your other options for moving your funds generally include:

You will need to login to your Guideline account and complete the onboarding steps for your Guideline IRA, which includes agreeing to the user terms and conditions.

Once you have claimed your IRA account, you will have full access to the assets. You’ll also be able to make changes to your portfolio and set up IRA contributions.

¹ While the law allows for a forceout level up to $7,000, Guideline only supports forceout provisions up to $5,000 at this time.

² For purposes of determining the IRA monthly base fee, account assets are determined based on the average daily balance of the account over the billable month. If you have more than one IRA with Guideline, the balances are added together to determine if the $10,000 threshold is met and the fee is only deducted once.

³ Investment advisory services for Guideline’s 401(k) (when 3(38) fiduciary services are appointed) and SEP IRA/IRA products are offered by Guideline Investments, LLC, an SEC-registered investment adviser. Calculated and deducted on a monthly basis at 1/12 of the annual stated rate (0.08%) based on the account balance on the last day of each month. For more information regarding fees and services, see the ADV 2A Brochure and Form CRS.

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