What Is a Force Out Distribution?
When employees who are participating in their company retirement plan change jobs or are separated from employment, they often leave behind small plan balances that can become costly to administer. For that reason, plans are permitted to have what is commonly referred to as a “force out,” or mandatory distribution provision, to handle small plan balances of under $7,000.
As a saver, paying attention to the vested account balance in your retirement plan after you separate from your employer is essential. Your plan may allow you to leave your account in your former employer’s retirement plan, roll it over to an individual retirement account, or transfer it to your new employer’s retirement plan if that plan allows it.
What Will Happen to My Account?
If your vested balance is greater than $7,000, you may choose to leave your account in the plan until required minimum distributions begin. Some reasons to consider leaving your retirement account in your former employer’s plan may include investment options, favorable fees, or other account tools. You may also be taking your time to consider how you intend to consolidate your retirement assets.
If your vested balance is greater than $125 and less than $7,000, you will receive a communication from Vestwell informing you that you have 45 days to move your assets to another qualified plan or an Individual Retirement Account (IRA) of your choice. If you do not act, Vestwell will open a “Safe Harbor” IRA on your behalf and transfer your assets out of the plan to that account. Once your new IRA is established with our Forceout IRA Department, you will receive communication on how to access your new account.
If you did have a new IRA account established on your behalf, please see our Forceout IRA Department's contact information below for any questions about that account:
Should your vested balance equal or fall below $125, the distribution process will result in a net-zero distribution to be processed. As stated in our fee disclosure notices on your portal, Vestwell charges $125 for a force out distribution. Since your balance is less than $125, the balance will be used to pay the processing fee, and no further balance will be available to distribute. Your final statement will show a zero balance and the distribution processing fee withheld from your account.
What Happens to the Unvested Balance of My Account?
As described in our article "What Does Vesting Mean?" there may be balances from your employer matching that you have yet to vest in. Any unvested balances are forfeited when you have a force out distribution.
Will I Be Charged for a Force Out Distribution?
Yes, you will be charged $125 for fees and costs associated with processing a force out distribution.
As pictured below, your fee disclosure notice can be accessed from your saver portal in the "All Documents" section under the "Plan" tab, which will detail all transaction-related fees.