What should you do with an old 401(k) in Nebraska?

Option 1: leave the money in the former employer's plan

Some plans let former employees keep their accounts. This may be worth
considering when the plan has useful investment options, institutional pricing,
desired withdrawal features, or services that would be lost after a rollover.

Ask the former plan administrator:

• whether a former employee may remain in the plan;
• the administrative and investment fees charged to the account;
• which investments and managed services remain available;
• whether withdrawals can be partial and how they are processed;
• how beneficiaries and contact information are maintained;
• whether the plan holds employer stock or an outstanding plan loan; and
• what future plan changes could affect former employees.

Leaving the account in place also means maintaining another login, beneficiary
record, and source of notices. Administrative convenience is a factor, but it
should not replace a comparison of the plan's actual terms.

Option 2: roll the balance to a new employer's plan

A new employer's plan may allow incoming rollovers, but it is not required to
accept them. Consolidating retirement savings in one employer plan can simplify
records and may preserve features available through a qualified plan.

Before choosing this route, compare:

• the new plan's investment menu and expenses;
• administrative fees and participant services;
• withdrawal and loan provisions;
• the way the plan accounts for pre-tax, Roth, and after-tax amounts;
• whether the plan accepts each type of money in the old account; and
• whether consolidation changes access to an age-based exception, employer
  stock treatment, or another plan-specific feature.

Get confirmation from the receiving plan before instructing the old plan to
send money.

Option 3: roll the balance to an IRA

An IRA can offer different investments, services, and account-consolidation
options. It can also introduce advisory, custody, transaction, fund, platform,
or product costs that do not exist in the employer plan.

An advisor recommending an IRA may receive compensation for managing or
servicing it. The Department of Labor says a rollover comparison should
consider the alternative of leaving assets in the employer plan and should use
information about the plan's investments, fees, expenses, and the participant's
interests. Ask for the reasons for a rollover recommendation in writing,
including:

• the old plan's total costs;
• the proposed IRA's total direct and indirect costs;
• services available in each;
• investments and restrictions in each;
• withdrawal features and any age-based tax exceptions;
• creditor and legal protections;
• required-distribution treatment;
• employer-stock consequences; and
• how the advisor and affiliated parties would be compensated.

An IRA is not a single product. The custodian, investments, advisory
arrangement, and costs have to be identified before a useful comparison can be
made.

Option 4: take a distribution

A cash distribution of previously untaxed money is generally included in
income unless it is rolled over. A taxable amount distributed before age
59 1/2 may also face a 10% additional federal tax unless an exception applies.

If an eligible rollover distribution from an employer plan is paid to the
participant, the plan generally must withhold 20% for federal income tax. That
withholding is not necessarily the participant's final tax liability. To roll
over the full eligible amount within 60 days, the participant generally has to
replace the withheld amount from other funds and then address the withholding
on the tax return.

Because cashing out can reduce retirement savings and create a tax bill, first
ask whether a direct rollover or another plan option would meet the need.

A direct rollover usually avoids the 20% withholding problem

In a direct rollover, the plan sends an eligible distribution directly to the
receiving plan or IRA. The mandatory 20% withholding generally does not apply.
A check made payable to the receiving plan or IRA can still qualify as a direct
rollover even if it is delivered through the participant.

A payment made to the participant is different. The IRS generally allows 60
days to complete a rollover of an eligible distribution, but the plan normally
withholds 20% from the taxable amount paid to the participant. Missing the
deadline can make the unrolled amount taxable unless a waiver or other relief
applies.

The safer operational sequence is:

1. confirm that the destination accepts the rollover and the types of money
   involved;
2. request the destination's exact payee and delivery instructions;
3. ask the old plan for a direct rollover;
4. retain the distribution statement and confirmation from both institutions;
5. verify that the money is invested as intended after it arrives; and
6. retain Form 1099-R and the receiving account records for tax preparation.

Stop before rolling if one of these special issues is present

Separation from service near age 55

IRS rules include an exception to the 10% additional tax for certain
distributions from a qualified employer plan after separation from service in
or after the year the participant reaches age 55. Different rules and
exceptions apply to IRAs. A rollover can therefore change access to money before
age 59 1/2. Confirm the rule before moving the account.

Employer stock

Employer securities distributed as part of a qualifying lump-sum distribution
may be eligible for special net-unrealized-appreciation tax treatment. Rolling
the stock to an IRA can eliminate the opportunity to use that treatment for the
later IRA distribution. Ask the plan administrator for the employer-stock cost
basis and consult a tax professional before directing a rollover.

An outstanding plan loan

Leaving employment can cause a plan to offset an outstanding loan against the
account. A qualified plan-loan offset caused by severance from employment or
plan termination may have a rollover deadline extending to the federal tax
return due date, including extensions, for the year of the offset. Other loan
offsets may remain subject to the 60-day rule. Confirm which event occurred and
the amount needed before the deadline.

Roth and after-tax money

Pre-tax, designated Roth, and after-tax contributions do not always belong in
the same destination. A rollover of untaxed money to a Roth IRA is generally
included in income for the year. IRS guidance permits certain distributions
containing pre-tax and after-tax amounts to be directed to separate eligible
destinations, but the transaction and reporting must be coordinated carefully.

Required minimum distributions and other ineligible amounts

Required minimum distributions, hardship distributions, certain periodic
payments, and several other categories are not eligible for rollover. Do not
assume that the entire amount shown on a plan statement can be moved.

Small automatic distributions

Plans may apply automatic-distribution procedures to smaller accounts if a
former employee does not make an election. The dollar threshold and procedure
depend on current law and the plan. Respond to plan notices promptly and choose
the destination rather than assuming the account can remain indefinitely.

Build a side-by-side comparison

Use plan fee disclosures, participant statements, the summary plan
description, the proposed IRA fee schedule, Form CRS, Form ADV, and the draft
account agreement. A comparison based only on the current investment lineup is
incomplete.

Questions to ask before signing rollover paperwork

1. What choices are available under my former plan?
2. Does my new employer's plan accept this type of rollover?
3. What are the total annual costs of each available account?
4. What services would I gain or lose?
5. How would the person recommending the rollover be paid?
6. Does the account include employer stock, after-tax contributions,
   designated Roth money, or a plan loan?
7. Could the age-55 separation exception matter to my withdrawal plan?
8. Is any part of the next distribution ineligible for rollover?
9. Should more than one destination be used for different tax sources?
10. Will the transaction be processed as a direct rollover?