When you terminate your 401(k) plan, we notify your participants and guide them through distributing their funds. Here is what to expect during the process and what actions your participants need to take.
We cannot start the termination process until all required documents are complete and approved. Your plan stays active until we tell you the process is underway.
Important: Once the plan termination process begins, all participants become 100% vested if they are not already.
We notify participants of the plan termination 2 – 3 business days after whichever of these dates is later:
The specified plan termination date
The date we received all required documents
Once we receive all required documentation, we send email notifications to all plan participants. The plan termination notice tells them:
The company is terminating the 401(k) plan
We will stop processing contributions
All assets need to be distributed
How to review their options and submit a distribution request
Their money stays invested in the market until we process the distribution request
After the initial notice, we send two more reminders with distribution instructions.
Once we accept the termination packet, we review your plan to make sure there are no outstanding items. After the review, participants tell us how to distribute their account balance — like a cash distribution, direct rollover, or another eligible option.
Participants who request a distribution should deposit any checks right away. Checks can only stay outstanding for 180 days (six months). If a participant does not deposit a check, it holds up the plan termination process because all assets need to leave the plan before we can terminate it.
If participants do not act within the timeframe in the email notifications, we send their assets to PenChecks. The exact timeframe varies based on your plan's termination date. PenChecks is a vendor that helps plans handle accounts belonging to unresponsive or missing participants, so the plan can successfully terminate.
Affected participants can access PenChecks to take a distribution of their assets when they're ready.