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My company was recently acquired/merged with another company, and I won't go into the gritty details about the acquisition, but suffice it to say that all existing employees were effectively let go from the old company and re-hired as new employees at the acquiring company.

So, our old 401k has been sitting in limbo more than 2 months now and I'd like to roll it out into an IRA/Roth IRA, but the paperwork to the 401K plan administrator documenting that we are no longer employees is caught up in the firestorm of other merger concerns and keeps getting delayed.

To make this question useful to a wider audience, let's just assume I left the old company under normal circumstances. Is there a legal requirement/deadline for an employer to complete the process to release 401K funds after you have left the company?

Is there any recourse for an employee in this situation?

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There may be a specific IRS-required deadline which might or might not have been violated in your case. but the main delay usually is from the employer's end. The 401k administrator has to receive verification that employment has terminated before the funds can be distributed, and this can take some time because some people get two weeks salary in lieu of notice etc. In your case, because of the merger/acquisition, there may be legal questions as to whether one employment was terminated and another begun (and so you can roll over the funds in the old 401k into an IRA) or whether the terms of the merger/acquisition are such that the assets of the old 401k plan get rolled over into the existing 401k plan of the new employer. In short, while "effectively let go from the old company and re-hired as new employees at the acquiring company" might be what it appears from the outside, legally it might be something different, and everybody is waiting till the lawyers figure out the details, and does not want to allow rollovers etc until the dust has settled.

  • I'm privy to some of the details of the deal, and am pretty sure that our employment was re-started. Technically the deal was structured so that all the assets were transferred and the employees hired off, but the old company still exists as a separate entity with no employees for numerous accounting reasons. Plus they have told us definitively that we would be able to roll our old 401K out if we chose to. – JohnFx Sep 8 '12 at 16:57
  • If your old company has no employees any more, who will tell the 401k administrator that you are no longer an employee of the company and therefore are eligible to roll over their 401k plan assets? The old company still exists, and the 401k plan administrator needs this authorization from the company before distributing the assets as rollovers (or cash for those wanting to cash out their 401k). So, maybe talking to whomsoever was the CFO of the old company or appropriate underling thereof and is now employed in the new company might be faster than banging on the plan administrator's door? – Dilip Sarwate Sep 8 '12 at 21:23

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