The Nuts and Bolts of a 401(k) plan
Rollover from a Previous Employer
If you had a profit sharing plan, 401(k) plan, thrift plan, employee stock ownership plan, or other type of retirement plan with another employer, your current employer may be willing to accept the money into your current 401(k) plan. You may even be able to roll over money into the 401(k) plan if you have put it in an IRA. Not every 401(k) plan accepts rollovers from other retirement plans, but many 401(k) plans do. Talk to your human resources department or your 401(k) plan administrator if you have money you would like to roll over.
Rolling over your retirement plan benefits from another plan to your current 401(k) plan can have several advantages:
Some employers require you to take your money within a certain time period after you leave if the account balance is less than $5,000. If your former employer insists on giving you the money, you can protect the money from current taxes by transferring it into another employer retirement plan or to a traditional IRA. If your account balance is less than $5,000, the plan may roll over your entire account balance automatically to a designated IRA unless you elect to have the distribution transferred to a different IRA or retirement plan, or to receive it directly.
When you retire, you may be able to take advantage of favorable tax treatment if you decide to take a lump-sum distribution. See the section Distributions from your 401(k) at Retirement for more details.
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