Participant Options
The Matisse IRA Rollover Program is designed to give your employees the option of receiving continued advice even after changing jobs or leaving the workforce.
How It Works
- We are a resource for your employees directly. As a retirement plan client, our team is available to answer your employees' questions and provide consultation about their company-sponsored retirement account(s).
- With most record keepers, we're able to create account portals for your employees to directly track their participant-level retirement plan accounts, including access to easy-to-understand performance reporting. Participants can request this option via email at info@matissecap.com.
- Many retirement plan participants become familiar with our advisors through enrollment meetings, employee education events, and other interactive gatherings designed to give your employees access to our team's professional expertise and guidance.
- As an employee changes jobs or approaches retirement, we're available to consult on and assist with retirement account transfer options that can seamlessly transition into a professional advisory relationship, when needed.
- Matisse can potentially provide your employees with guidance beyond their working years, with the added benefit of working with a team who is already familiar with their retirement account investment options.
One of the biggest benefits of a 401(k) retirement plan is the ability for your employees to transfer assets easily when they leave the company. For many employees, though, the path forward isn't always clear.
What should they do with their savings? What are they even allowed to do with their savings? What is the best way to ensure that they don't have to pay unnecessary penalties or taxes?
For many plan participants, this is an overwhelming decision, but with the Matisse IRA Rollover Program, together we can provide them with guidance during a possibly tumultuous time. Rolling over a 401(k) to an IRA (Individual Retirement Account) is a great option for some individuals to secure their savings and our program is designed to help your employees decide how to handle their 401(k) before the big move.
Participant Options When Retiring or Changing Jobs
If Allowed, Participants Leave Their Savings in Your Retirement Plan
This option allows participants to defer making a decision about their retirement savings immediately. Their account will still be subject to your plan's rules, choices, costs, and withdrawal options.
Pros
- No immediate action is required
- Earnings remain tax-deferred until they withdraw them
- Potential access to 401(k) benefits unavailable with an IRA, like loans and investment choices
- Option to roll over to an IRA in the future
- Services available while the participant was an employee may still be available
- Federal law protects most assets in a 401(k) from creditor claims
- Potentially lower administrative and investment fees and expenses compared with an IRA
- Partial distributions or installment payments may be available from your plan
- Penalty-free withdrawals are available to the participant if they leave your company between ages 55 and 59½
- Required minimum distributions (RMDs) may be delayed beyond age 72 if the participant is still working
Cons
- Special tax or financial planning may be necessary if the participant holds stock in your company's plan before rolling over assets into a new 401(k) or IRA
- Contributions by the participant into your 401(k) program are no longer allowed
- Limitations may exist on available investments and the ability to transfer assets among funds
- Added complexity due to managing savings in multiple plans
- Fees and expenses for your retirement plan may exceed those of an IRA
If Allowed, Roll over Savings to Their Next 401(K) Plan
For participants starting a new job, moving their savings from their retirement plan to a new 401(k) plan with their new employer's plan is an enticing option. By doing this, they can keep the whole of their savings in one place, especially if their new plan has comparable or preferable features, costs, and investments.
Pros
- Earnings accrued are tax-deferred
- Loans may be available if the participant is allowed to borrow against their new 401(k)
- Federal law protects most assets in a 401(k) from creditor claims
- Potential access to 401(k) benefits unavailable with an IRA, like loans and investment choices
- The new 401(k) may have lower administrative and/or investment fees and expenses than an IRA
- Required minimum distributions (RMDs) may be delayed beyond age 72 if the participant is still working
Cons
- Range of investment choices available in the new 401(k) may be lower than your retirement plan or an IRA
- Fees and expenses could be higher than they were for your company's 401(k) or an IRA.
- Rolling over company stock may have negative tax implications.
Roll over Their 401(K) to a Traditional IRA
A Traditional IRA can give participants in your plan additional flexibility in their retirement savings and investments if they are leaving the company. Traditional IRAs are tax-deferred, giving many of the same tax benefits as a 401(k).
Pros
- Earnings accrued are tax-deferred
- Potential access to 401(k) benefits unavailable with an IRA, like loans and investment choices
- Management can be streamlined by combining several retirement accounts into a single IRA
- Advice, investing tools, and other services not available with a typical 401(k) plan
Cons
- Loans cannot be taken against an IRA
- Fees for maintaining an IRA, combined with other investing fees and expenses, may exceed the cost of saving with a 401(k)
- Some investments available within a participant's 401(k) may not be available in an IRA
- Assets in an IRA are protected from creditor claims in fewer cases than a 401(k), like bankruptcy
- Company stock rollovers may induce negative tax effects
- RMDs from Traditional IRAs are mandatory after the age of 72, regardless of employment status
Roll over Their 401(K) to a Roth IRA
A Roth IRA can give participants in your plan additional flexibility in their retirement savings and investments if they are leaving the company. Additional contributions to Roth IRAs are taxed, but earnings can be withdrawn at the appropriate age tax-free, giving many of the same tax benefits as a 401(k).
Pros
- Contributions to and earnings on a Roth 401(k) from your plan can be rolled directly into a Roth IRA with no tax penalty
- Contributions and earnings grow tax-free
- No RMDs
- A greater number of investments choices may be available than a 401(k)
- Advice, investing tools, and other services not available with a typical 401(k) plan
- Management can be streamlined by combining several retirement accounts into a single IRA
Cons
- Loans cannot be taken against an IRA
- Traditional 401(k) assets are subject to taxes when rolled into a Roth IRA (for that tax year)
- Fees for maintaining an IRA, combined with other investing fees and expenses, may exceed the cost of saving with a 401(k)
- Some investments available within a participant's 401(k) may not be available in an IRA
- Assets in an IRA are protected from creditor claims in fewer cases than a 401(k), like bankruptcy
- Company stock rollovers may induce negative tax effects
Make a Withdrawal in the Form of a Cash Distribution
A cash withdrawal may sound like an appealing short-term option, but be sure participants in your plan understand the consequences of cash distributions. Cash distributions are subject both to taxes and a mandatory federal withholding rate of 20%. In addition to this, they may be subject to early withdrawal penalties.
Pros
- Cash on hand from a distribution can be helpful for participants in immediate financial need
Cons
- Penalties and taxes are high for cash distributions from 401(k) plans
- Distributions made before 59½ are taxed as income and can induce a 10% penalty
- Earnings on their savings, whether invested or held in a savings account, are no longer tax-deferred
- Removing money from their retirement account can have a negative impact on their total savings when they retire