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Need Help! Employer switching from SARSEP to 401k


Guest Mt.High

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Guest Mt.High

I really really hope someone is willing to help with a few questions!!

First a little background. I have about $100,000 invested in my employer’s retirement plan. The present plan with the present financial company is a SARSEP that my employer has had for many years. My employer now has decided to switch both financial companies and retirement plans. The new plan under the new financial company will be a 401k plan. This switch will take place after the first of the year. I have asked my employer if the old SARSEP plan with the old financial company is being terminated or is it just not going to be funded any longer by my employer (pay role reductions). Seems I can’t get a good answer.

Now my question and forgive me I don’t know much about the financial world but want to watch over my retirement investments as best I can and not get myself trouble with the IRS.

The staff from the new financial company, at a recent meeting, stated that any money now in the SARSEP plan could stay where it is or it could be rolled over into the new 401k plan (just 2 options discussed). I asked what, if any, fees would apply if money was rolled over to the 401k plan and I really didn’t get an answer except we can discuss that when we meet on an individual basis.

Question 1: Are there other options available other than the 2 stated above?

Question 2: Is it customary for the new financial company to charge fees for the funds rolled over to the new 401k plan or is the initial movement of funds waived of fees?

Question 3: If I have a choice and leave the $100,000 it the SARSEP at the old company, and this plan is no longer available thru my employer, can the money now in the SARSEP plan be moved into a rollover IRA (regular or traditional IRA) at the old financial company, or any other fund company for that matter, to get it out of the old SARSEP plan. OR does it have to be rolled over into another qualified retirement plan and nowhere else since I’m not quitting or changing jobs? I would honestly like to move the money out of the SARSEP and into a regular or traditional IRA with a company like Vanguard instead of rolling it over into the new 401k plan, if possible, but have no idea if I can do that. I will still fund the new 401k with future pay role reductions but don’t want to put any part of the $100,000 now in the SARSEP in the new 401k if I don’t have to. **Hope this makes sense.**

I have searched the net for these answers and everything I find relates to either quitting your job or changing jobs. Nothing I have found discusses or relates to staying with the same employer and the employer changing financial companies and plans (what you can and can’t do in this situation). I cannot get good information from my employer – I just don’t think they understand this situation any better than I do.

Again any help would be VERY helpful and thank you.

Karen

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Karen-

A SARSEP is just a vehicle to get money into an IRA - so what you have is an IRA account. You can leave it right where it is, or you can roll it into another IRA (at a new investment company if you wish), or you can roll it into the new 401(k) plan. You might very well pay a sales charge to roll it into the new plan, or pay higher annual expenses - or not, there's no way to know without digging into the details. But if a broker is involved, s/he is getting paid, and that is coming from the accounts in some way or another. Unless the 401(k) plan has a lot of money in it, and the investment company is giving the plan very low expenses as a result, I doubt there's an advantage to rolling your money into the plan.

Ed Snyder

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I would honestly like to move the money out of the SARSEP and into a regular or traditional IRA with a company like Vanguard instead of rolling it over into the new 401k plan, if possible

Just adding to what Bird said to specifically address this one point in your post.... yes, you can do that. Just make sure all the SARSEP contributions have gone in before you do a rollover to avoid the minor problem of getting a small additional amount of money in the SARSEP that could require a 2nd rollover.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Before rolling over your IRA assets to a 401(k) plan, do some research on the fees . One of the hot-issues now, is the hidden-fees that apply to 401(k) assets.

Bear in mind too, that unless they keep your IRA assets separate from your 401(k) assets, the IRA assets will be subject to the distribution rules of the 401(k), which means you may not be able to access the assets for a long time. Therefore, if you ever want to do a Roth conversion, you may not be able to do so, of if you need to access the assets for any other reason

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Unrelated: Need help with question at http://benefitslink.com/boards/index.php?s...c=37484&hl=

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