The company I’ve worked for for 21 years is being acquired by a larger company; the merger is happening faster than expected (everyone was anticipating a Q2 wrap-up, but it may be Q1). No one is sure about what will happen to our jobs going forward.
Today we received notice that our current 401ks are being auto-rolled into the 401k plan of the acquiring company. Is this standard? Does it bode anything for the future? Or is it something that just happens in these situations?
That’s pretty standard, but you should ask someone in HR if there’s an opportunity to roll your 401k into an outside IRA. You’ll save on fees in the long run for funds you’ve already accumulated.
My 401k was rolled over into another company at least 3 times over the years, never had any problems.
mmm
It’s pretty standard, but take a close look at how they’re deciding what funds they’re transferring the funds into in the new plan. IME, that’s often not done very well. And as Munch said, it may be an opportunity to roll it right out of the company.
Yeah, that’s pretty standard.
There may be a short lockout while they finalize the transfer and you’ll need to set your investment options on the new plan but otherwise, it’s pretty transparent.
The fact they’re rolling plans together is independent of what they’re planning for jobs or “redundancies” or whatever, so don’t use the fact they’re going to a single retirement plan to forecast job security.
The information we received states “Any future contributions made to the (REDACTED)Plan will be invested into its Qualified Default Investment Alternative (QDIA) funds, which are target date funds based on your anticipated retirement date.”
Sounds pretty generic.
More to my original question, though: For those that have lived through an acquisition, does the auto-rolling of a 401k speak to an anticipated retention of jobs? Or is it not really an indicator?
EDIT: Thanks, Great_Antibob!
Definitely make sure you make adjustments. Target Date funds are generally okay - but some of them have some ridiculous fees, especially if they’re run by the plan administrator.
IMHO it indicates nothing.
It indicates that at least some employees will work at the combined company for at least one pay period. So those folks will need a 401k to contribute to, and the acquiring company doesn’t want to run two of them.
Beyond that, nothing more can be said. It might be 100% employee retention forever, or close the whole old company down 3 months later. Or anything in between. There is no way to read anything plus or minus into combining 401k plans.
As to the investment choices, they’re setting a default for the first pay period before you’ll have access to the new website to make your own choices. All bog standard.
I do empathize though. Uncertainty at work after 20+ years is tough to deal with.
The things to look for are the relative sizes of the companies, whether there’s overlap in customer bases, geographic footprints, job functions, etc. The less similar the companies are, the more likely it is any layoffs that do happen will be smaller or more limited. But even then, there are no definitive ways of telling, short of official announcements.
Trying to read the tea leaves in things like combining retirement plans or branding or things like that are just going to add to your stress without actually telling you anything. As always keep your resume updated and maintain any relationships you’ve built with current and former co-workers.
THIS. So very much THIS.
The left hand is moving the funds because the old 401K program is shutting down, while the right hand might either be planning layoffs or retention bonuses. No way of knowing.
Besides the possible high fees for target date funds, if you have other investments they might cause your portfolio to become unbalanced. I went over my 401K allotments with my financial adviser so I would have balance across all my investments. It’s a good default, but does the new plan have other options?
Keep the Rule of 55 in mind if it applies to you. Transferring could be a horrible idea.
You can retire between the ages of 55 and 59.5 and access your most recent 401k without penalty. You have to wait until 59.5 to have free access to everything. If you are close to voluntary retirement and in that age zone, you could be left with a paltry 401k available.
Thanks, everyone, for your insights. I still have 10 years before (theoretical) retirement. I’ve been managing my 401k so far, and not doing too badly at it (I tend to rebalance every 6 months or so).
The notice we received did indicate that, once everything was in place, we could choose different investment choices, so I’ll definitely have to do some research when the time comes.
They almost certainly have a very similar menu of choices. You should be able to put something together that’s virtually the same.
Will it be with the same plan manager? Vanguard, Fidelity, Principal, etc… or different company?
I have one through Fidelity from a previous employer and my current employer goes through Vanguard. Between the 2 I prefer Vanguard. You may want to check and see if the new retirement plan management company is a good fit for your goals.
In my case I never rolled it over to my new plan from Fidelity despite advice that I should. Ended up being for the better as I plan on retiring at 58-60 and pull from that account first and wait until I am older before pulling from Vanguard.
Your scenario may be different as you have the same employer but switching plans so I am not sure of your options.
While true, I’m not seeing how this applies to the OP, who is wondering about transferring from one 401K plan to another. Transferring to an IRA can also be done without penalty - I did so when leaving jobs where I had a 401K.
If you transfer from the company’s old 401k to the new one, you are able to do the Rule of 55 with the whole thing. If you move it to an IRA , you can’t.
As it turns out, the OP isn’t going to use that particular rule so it doesn’t matter for their case but it could make a very big difference.
My wife and I gave been on every conceivable side of this so many times.
Conversion of the 401k is a given unless the acquiring company has little or no business in the US prior to the acquisition, which does not appear to be the case here.
This shouldn’t tell you anything about your job prospects. We’ve had rollovers when 75% of the target company’s employees were still there two years later, but also when 75% were handed severance packages almost immediately.
No, it means nothing at all with regard to jobs. If they are doing this they are rolling the accounts over because the original plan will no longer exist. They can roll your account over one day and lay you off the next day. But it’s still your account and any vested contributions are still your money. Or they could keep you forever. Or anything in between.