Recent Changes in Federal Law and Old 401(k)s

A recent change in federal law is likely to significantly impact individuals with smaller 401(k) retirement plans left behind at their previous employers. Although the new law is intended to be beneficial, it is essential to note that there may be potential negative consequences that the public should be aware of.

The History 

The landscape of retirement plans offered by companies has long faced two challenges: costs and the fiduciary duty owed by plan sponsors. In 2001, an effort was made to address the issue of 401(k) accounts left behind by company employees by introducing automatic rollovers for accounts ranging from $1,000 to $5,000. Fast forward to 2024, the SECURE Act 2.0 has increased the threshold from $5,000 to $7,000.


The recent change in law is expected to have a ripple effect, resulting in a surge of involuntary rollovers and impacting an estimated 800,000 additional 401(k) participants. Additionally, as these funds are compelled to move, they will likely end up in cash or cash equivalent type positions, which means limited upside potential for these assets unless the account owner takes affirmative action. Also, while not the case with all IRA custodians, individuals may face increased fees associated with these accounts.

Next Steps

Considering these changes, individuals should be proactive in addressing the location of their old 401(k)s. The first step is to track down these dormant accounts. Once found, the next move is to consider transferring these funds to either a new company 401(k) plan (current employer’s plan) or a Rollover IRA at a reputable custodian such as Charles Schwab, Fidelity, etc. However, please note that while there is a new Auto-Portability Initiative in progress to make this process easier in the future, it is important to exercise your due diligence because it is still in its early stages.

As the financial landscape continues to evolve, it becomes crucial for individuals to stay informed and be proactive in securing their retirement savings. Whether tracking down old 401(k)s or navigating the complexities of rollovers, being proactive can help ensure financial well-being.



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certified financial planner Marshall Clay wears a gray jacket and white shirt while posing for professional photo in office

Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.



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