A 401(k) is a cornerstone of retirement savings for many, and when you change jobs or retire, deciding what to do with your existing 401(k) can feel like navigating a maze. If your previous employer utilized ADP for their 401(k) plan, you're in the right place! This comprehensive guide will walk you through the process of rolling over your 401(k) from ADP, ensuring your hard-earned retirement savings continue to grow.
Ready to take control of your financial future? Let's get started!
Understanding Your 401(k) Rollover Options
Before we dive into the "how," it's crucial to understand what a 401(k) rollover entails and the different paths you can take. A rollover essentially moves your retirement funds from one qualified retirement account to another, maintaining their tax-deferred status.
There are generally three main options when you leave an employer and have a 401(k):
Leave it in the old plan: If your balance is substantial (often $5,000 or more), your former employer might allow you to keep your funds in their plan.
Roll it over to your new employer's 401(k): If your new company offers a 401(k) and accepts rollovers, this can be a good way to consolidate your retirement savings.
Roll it over to an Individual Retirement Account (IRA): This option often provides the most flexibility in terms of investment choices. You can roll it into a Traditional IRA or, if you're willing to pay taxes now, a Roth IRA (which offers tax-free withdrawals in retirement).
Cash it out: This is generally not recommended. Cashing out your 401(k) before age 59½ can lead to significant tax penalties (a 10% early withdrawal penalty in addition to ordinary income tax).
For the purpose of this guide, we'll focus on the rollover options, as they preserve your retirement savings and their tax-advantaged status.
Step 1: Discover Your ADP 401(k) Details
Alright, let's kick things off! The very first thing you need to do is gather all the necessary information about your current ADP-managed 401(k) plan. Think of this as your financial blueprint.
A. Accessing Your ADP Retirement Account:
Online Portal: Your primary access point will likely be the ADP Retirement Services online portal. If you haven't logged in recently, you might need to retrieve your login credentials. Look for a "Forgot Username" or "Forgot Password" link.
Past Statements: Dig out any recent 401(k) statements from ADP. These statements typically contain vital information such as your account number, the plan administrator's contact details, and a summary of your holdings.
Contact Former HR/Benefits: If you're having trouble accessing your online account or finding recent statements, reach out to the Human Resources or Benefits department of your former employer. They can direct you to the right resources or provide the necessary contact information for ADP Retirement Services.
B. What Information to Look For:
Once you're in your ADP 401(k) account or have your statements handy, pinpoint the following:
Your 401(k) Plan Account Number: This is unique to your individual retirement account.
Plan Administrator Contact Information: This will be ADP Retirement Services (or their affiliated recordkeeper). Look for a specific phone number or department dedicated to retirement plan inquiries and rollovers.
Current Holdings and Balances: Understand what investments your money is currently in and the total value of your account.
Vesting Schedule: While your own contributions are always 100% vested, employer contributions may have a vesting schedule. Confirm how much of the employer match you are fully vested in. If you're not fully vested, you might lose some of the employer contributions if you roll over before the vesting period is complete.
Step 2: Choose Your Destination Account
Now that you know what you have, it's time to decide where you want your 401(k) funds to go. This is a critical decision that impacts your investment flexibility, fees, and future retirement planning.
A. Rolling Over to a New Employer's 401(k):
Pros:
Consolidation: Keeps all your 401(k)s in one place, simplifying management.
Creditor Protection: Generally offers strong creditor protection.
Loan Options: Some 401(k) plans allow you to take loans against your balance.
Delayed RMDs (in some cases): If you're still working past age 73, you might be able to delay Required Minimum Distributions (RMDs) from your current 401(k).
Cons:
Limited Investment Options: Your choices are restricted to what your new employer's plan offers.
Fees: Plan administration fees and investment expenses can vary.
Action: Contact the HR or Benefits department of your new employer to inquire about their 401(k) plan's rollover policy. They will provide you with the necessary forms and instructions. You'll need their plan administrator's contact information and the exact name your new account should be made payable to (e.g., "XYZ 401(k) Plan FBO [Your Name]").
B. Rolling Over to an Individual Retirement Account (IRA):
Pros:
Expanded Investment Choices: IRAs typically offer a much wider array of investment options (stocks, bonds, mutual funds, ETFs, etc.), giving you greater control.
Consolidation: You can consolidate multiple old 401(k)s and IRAs into a single account, simplifying your portfolio.
Potentially Lower Fees: You might find IRAs with lower administrative and investment fees compared to some 401(k) plans.
Cons:
Less Creditor Protection: IRAs generally have less creditor protection than 401(k)s (though this varies by state).
No Loan Options: You cannot take loans from an IRA.
RMDs Start Earlier: RMDs generally begin at age 73 for IRAs, regardless of whether you're still working.
Action:
Choose a Brokerage Firm: Select a reputable brokerage firm (e.g., Vanguard, Fidelity, Schwab) to open your new IRA.
Open a Rollover IRA: Specifically open a Rollover IRA or Traditional IRA if your ADP 401(k) is a traditional pre-tax account. If you have a Roth 401(k), you'll open a Roth IRA.
Gather New Account Details: Once your IRA is open, obtain the routing and account numbers, and the exact "payable to" information for the rollover.
Step 3: Initiate the Rollover Request with ADP
This is where you directly engage with ADP to begin the transfer of your funds.
A. The Preferred Method: Direct Rollover (Trustee-to-Trustee Transfer):
Why it's preferred: This is the safest and most recommended method. The funds are transferred directly from your ADP 401(k) to your new retirement account without ever passing through your hands. This eliminates the risk of tax withholding and potential penalties.
Process:
Contact ADP Retirement Services: Call the dedicated rollover support line for ADP Retirement Services (the number you found in Step 1). Clearly state that you wish to initiate a direct rollover of your 401(k) to your chosen destination account (either a new employer's 401(k) or an IRA).
Provide New Account Information: ADP will require the detailed information of your new account, including:
Name of the receiving financial institution (e.g., Fidelity, Vanguard, your new employer's plan administrator).
Account number of your new IRA or 401(k).
The exact "payable to" name (e.g., "Fidelity Management Trust Co. FBO [Your Name]" or "ABC 401(k) Plan FBO [Your Name]"). This is crucial for avoiding tax issues.
Routing or wire transfer information if it's an electronic transfer. If it's a check, confirm the mailing address.
Complete Any Forms: ADP may require you to fill out a "Distribution Request" or "Rollover Request" form. This form will typically ask for your personal details, your ADP 401(k) account number, the type of rollover (direct), and the recipient account details.
Confirm Details: Double-check every single detail you provide to ADP. Even a small error can cause delays or lead to your funds being mistakenly treated as a taxable distribution.
B. The Less Preferred Method: Indirect Rollover (60-Day Rollover):
What it is: With an indirect rollover, ADP sends you a check made payable to you. You then have 60 days from the date you receive the funds to deposit the entire amount into your new qualified retirement account.
Why it's less preferred (and risky):
Mandatory 20% Withholding: ADP (or any 401(k) administrator) is legally required to withhold 20% of the distribution for federal income taxes. If your 401(k) balance is $50,000, you'll receive a check for $40,000. To complete the rollover and avoid taxes and penalties, you must deposit the full $50,000 into your new account within 60 days. This means you'll need to come up with the extra $10,000 from another source. You'll get the 20% back when you file your taxes, but it ties up your money.
60-Day Deadline: Missing this deadline means the entire distribution becomes taxable income, and if you're under 59½, you'll also incur the 10% early withdrawal penalty.
"Once-per-Year" Rule: You can only perform one indirect rollover from any retirement account within a 12-month period.
Process: While generally discouraged, if you choose this route, you'll still contact ADP and specify an indirect rollover. Be prepared for the tax withholding and the strict 60-day deadline.
Step 4: Monitor the Rollover Process
The rollover isn't complete until the funds are safely in your new account. Active monitoring is key!
A. Tracking the Transfer:
Get Confirmation from ADP: After submitting your request, ask ADP for a confirmation number or a timeline for the transfer.
Expect a Check (if direct rollover by check): If ADP sends a check (common for direct rollovers to IRAs), it will typically be made payable to your new financial institution FBO (For Benefit Of) your name. Do NOT endorse or cash this check. Immediately forward it to your new financial institution with any required forms they provide.
Check Your New Account: Regularly check your new IRA or 401(k) account online to confirm that the funds have been received and properly invested.
Follow Up: If the funds haven't appeared within the timeframe provided by ADP (or your new institution), follow up with both parties.
B. What to Expect from ADP:
Form 1099-R: You will receive a Form 1099-R from ADP in the following tax year, reporting the distribution from your 401(k). If it was a direct rollover, the taxable amount will be zero, and the distribution code will reflect a non-taxable rollover. Keep this for your tax records.
Step 5: Invest Your Rolled-Over Funds
Congratulations! Your funds are now in their new home. But the journey isn't over – these funds need to be invested to continue growing for your retirement.
A. Setting Up Your Investments:
Default Investments: Be aware that often, rolled-over funds initially sit in a "cash" or "money market" holding account within your new IRA or 401(k). They are not automatically invested.
Review Investment Options:
For a new employer's 401(k): Review the investment options available within that plan.
For an IRA: You have a vast universe of investment choices. Consider your risk tolerance, time horizon, and financial goals. Many brokerage firms offer tools and resources to help you choose appropriate investments (e.g., target-date funds, diversified index funds).
Allocate Your Funds: Once you've decided on your investments, actively allocate your rolled-over funds into those choices.
B. Seeking Professional Guidance:
If you feel overwhelmed by investment decisions, consider consulting a financial advisor. They can help you create a personalized investment strategy and manage your portfolio.
10 Related FAQ Questions: How to...
Here are some common questions you might have about rolling over your 401(k) from ADP, with quick answers:
1. How to find my ADP 401(k) account number?
Log into your ADP Retirement Services online portal, check recent 401(k) statements, or contact your former employer's HR/Benefits department.
2. How to know if my new employer's 401(k) accepts rollovers?
Contact your new employer's HR or Benefits department directly and ask about their 401(k) plan's rollover policy.
3. How to choose between rolling over to an IRA vs. a new employer's 401(k)?
Consider investment flexibility, fees, creditor protection, loan options, and RMD rules. An IRA generally offers more investment choice, while a new 401(k) may offer better creditor protection and potentially employer match opportunities.
4. How to ensure a direct rollover from ADP to avoid taxes?
When initiating the request with ADP, explicitly state you want a "direct rollover" or "trustee-to-trustee transfer." Ensure the check (if applicable) is made payable directly to the new institution "FBO [Your Name]".
5. How to handle a Roth 401(k) rollover from ADP?
If you have a Roth 401(k) with ADP, you can roll it over directly into a Roth IRA or a new employer's Roth 401(k) tax-free. If you roll a traditional 401(k) into a Roth IRA, it's considered a Roth conversion and will be a taxable event.
6. How to get the correct "payable to" name for my new IRA or 401(k) for the rollover check from ADP?
Contact your new IRA provider (e.g., Fidelity, Vanguard) or your new employer's 401(k) administrator. They will provide the exact wording required for the check, including "FBO (For Benefit Of) your name."
7. How to track the status of my 401(k) rollover from ADP?
Obtain a confirmation number from ADP when you initiate the rollover. Then, regularly check your new retirement account online for the funds to appear. If there's a delay, contact both ADP and your new institution.
8. How to avoid the 60-day indirect rollover mistake?
Always opt for a direct rollover whenever possible. If an indirect rollover is unavoidable, be prepared to deposit the full amount (including the 20% withheld for taxes) into your new account within 60 days.
9. How to invest my funds once they've been rolled over?
Once the funds arrive in your new IRA or 401(k), they often sit in a cash account. You must actively choose investments from the options available in your new plan or IRA to ensure your money is growing.
10. How to get help if I encounter issues during the ADP 401(k) rollover process?
First, contact ADP Retirement Services directly. If you need further assistance or financial guidance, consider consulting a qualified financial advisor.
