You start a job, you enroll in the 401(k) plan and that’s it, right? But what happens if your company gets sold?

The good news is, your money doesn’t vanish. It’s still yours, you just have to figure out the next step. There are steps that have to happen and options and plans.

First, how the transaction or sale is structured can impact plans. If a company is being sold with all of its assets, then the company will need to terminate its employees before the sale closes – and terminate its 401(k) plan.

But, if the company is a sale for stock or membership benefits, the 401(k) plan can continue unless the entity buying the company wants it to be terminated.

For plans that include matching or profit sharing that aren’t fully vested, those accounts will be made fully vested if the plan is terminated.

There are also rules in place that help employees if your company is only selling a portion of its assets, as well.

If you are a participant who had a loan, when the 401(k) is terminated, those loan balances are due – however, if you can’t pay it off, the balance of the loan will be treated as a taxable distribution. There is also an option to rollover the loans to the participant’s new employer.

Companies are also required to take certain steps to find missing plan participants and send letters. If the person can’t be found, the account balance will be transferred.

Finally, your company doesn’t have to give you advance notice of the 401(k) plan termination.

There are rules in place on how to wind down the plan, and they depend on the type of sale it is.

The bottom line is this: Each sale and plan are unique and there will always be questions and concerns when a company is sold. Make sure you ask questions and stay on top of things during the process.

Do you still have questions about retirement planning options?

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If you have other questions about retirement plan loans, email us or call 937.308.0758.