Can my old employer move a small 401(k) balance into an IRA without asking me?

By Kaz · Published 28 September 2026 · How this site checks figures

Summary

Yes, if the balance is small enough and the plan has the rule. As IRS Notice 2026-13 puts it, a plan may pay out a departing worker's vested benefit without consent when its present value "does not exceed $7,000," a ceiling SECURE 2.0 raised from $5,000. If that payout is more than $1,000 and you don't pick a rollover destination or ask for the cash, the plan has to send it by direct rollover to an IRA at a provider the plan chooses.

A $4,200 account, step by step

As an example, take someone who left a job two years ago with $4,200 vested in the 401(k). That is under $7,000, so a plan with a cash-out provision can close the account without her consent. It is over $1,000, so if she doesn't answer, the money can't just be mailed to her as a check. It goes into an IRA "of a designated trustee or issuer" picked by the plan.

Before that happens, the plan administrator has to tell her in writing that the distribution may be paid in a direct rollover to an IRA, either in a separate notice or as part of the section 402(f) notice.

Two details can change her outcome. The plan may leave out money she rolled in from an earlier job when it measures the $7,000; the Notice says plans "may provide" for that. And the whole arrangement is optional: section 411(a)(11) "generally permits" plans to include it, so a plan without the provision can't use it to close her account.

What the default IRA has to look like

The Department of Labor gives plan fiduciaries a safe harbor for these rollovers, with conditions. The money must be "invested in an investment product designed to preserve principal and provide a reasonable rate of return, whether or not such return is guaranteed, consistent with liquidity." Fees and expenses can't exceed what the same provider charges for comparable IRAs opened for other reasons.

Participants also have to receive a summary plan description, or a summary of material modifications, that describes the automatic rollover provisions. It has to state how the IRA's fees and expenses will be allocated and give "the name, address and phone number of a plan contact." For someone trying to trace where a small balance went, that document names the person to call. The Labor Department's Retirement Savings Lost and Found can show the plan and its administrator, but not which IRA the money went to.

Sources

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