[click answer below]

A) $1,500

B) $2,500

C) $4,000

D) $5,000

A) $1,500

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B) $2,500

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C) $4,000

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D) $5,000

Correct!

According to EBSA, there are a few options for plan participants and 401(k) account money if you leave their employer.

1. If your account balance is less than $5,000 when you leave the employer, the plan can make an immediate distribution without your consent. If this distribution is more than $1,000, the plan must automatically roll the funds into an IRA it selects, unless you elect to receive a lump sum payment or to roll it over into an IRA you choose. The plan must first send you a notice allowing you to make other arrangements, and it must follow rules regarding what type of IRA can be used (i.e., it cannot combine the distribution with savings you have deposited directly in an IRA). Rollovers must be made to an entity that is qualified to offer individual retirement plans. Also, the rollover IRA must have investments designed to preserve principal. The IRA provider may not charge more in fees and expenses for such plans than it would to its other individual retirement plan customers.

2. A lump sum – you can choose to receive your benefits as a single payment from your plan, effectively cashing out your account. You may need to pay income taxes on the amount you receive, and possibly a penalty.

3. A rollover to another retirement plan – you can ask your employer to transfer your account balance directly to your new employer's plan if it accepts such transfers.

4. A rollover to an IRA – you can ask your employer to transfer your account balance directly to an individual retirement account (IRA).