Starting a new job may be an exciting opportunity to potentially make more money, but for some Americans, they may be shying away from the serious cash flow associated with their old job.
Take Annie Morita, for example. Morita, 29, of Rochester, is one of a growing number of Americans affected by an involuntary rollover of their 401(k) after leaving a company.
As she explained to the Wall Street Journal, Morita received notice from her former employer in 2021 that her 401(k) was being transferred into an IRA (1). When she failed to make a decision about her IRA for the next few years, she eventually discovered that the balance had actually decreased in her investment account.
“I felt cheated,” she said. “It feels insulting to people’s future that the balance will decrease rather than increase over time.”
Unfortunately, Morita’s story is all too common; Under the relatively new law, employers can now top up 401(k) accounts belonging to former employees. For balances less than $1,000, employers can send checks to former employees. But for accounts between $1,000 and $7,000, employees can make involuntary transfers to IRAs, where the money won’t have much benefit, if any.
Here’s what you need to know about involuntary rollovers, and how you can protect your investment when you leave the company.
This change in the law generally affects those with low 401(k) balances. Under the new law, people with balances of $7,000 or more can stay in a former employer’s 401(k) plan.
But for those who don’t have at least $7,000 in a 401(k) when they leave a company, having a former employer move money out of the account and into a safe harbor IRA can be expensive.
“Safe harbor IRAs, which must notify owners that they have money, can prevent asset building,” reports the WSJ. “Take someone with $4,500 in a safe harbor IRA earning 2% annually. After four decades that person would have $10,130. Instead of investing in a portfolio of stocks and bonds earning 5% annually, that person would have $33,260.”
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In total, Americans have about $28 billion in safe harbor IRAs — a special type of IRA that employers use for involuntary 401(k) rollovers — and that total could rise to $43 billion by 2030, according to the Employee Benefit Research Institute (1). Additionally, EBRI reports that more than a third of workers still have money in their IRA three years after leaving their previous employer.
From an employer’s perspective, large numbers of small-balance 401(k) accounts can create administrative issues and increase their plan costs (2). However, the WSJ report indicates that many Americans have been affected by these administrative clean-up efforts. In 2025 alone, employers transferred an estimated 1.7 million from 401(k) accounts to safe harbor IRAs, and that total is expected to increase to 2.2 million by 2030.
For workers, forgetting to reinvest their 401(k) balance or simply overpay the account can have big consequences — especially for the next generation of retirees, who, according to a CNBC report (3), appear woefully unprepared for retirement.
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For those who have a 401(k) with their current employer, it’s important not to forget about these accounts when they leave the company, because doing so could cost you money down the road.
Some workers may be fine with rolling their 401(k) into an IRA when they leave the company, but for those who prefer to keep the money in an account that earns good compound interest, reinvesting the funds as soon as you leave the company is critical.
When an employer moves your 401(k) into a safe harbor IRA, they are required to notify you, and the holder of your new IRA is also required to notify you of your new account.
If you are unsure about the status of a 401(k) account with a former employer, you can contact the said former employer, or the 401(k) plan holder, to check the status of the account. If you’re having no luck with that, there are also online databases you can use to search for your old accounts, including the National Registry of Unclaimed Retirement Benefits, and the Employee Benefits Security Administration’s Abandoned Plan Database.
Once you access the old retirement account, you can roll the balance into your current IRA or 401(k).
Unfortunately, it can be easy to forget about a 401(k) when starting a new job. In fact, Capitalize estimates that by July 2025, Americans will have a total of 31.9 million 401(k) accounts, believed to hold up to $2.1 trillion in assets (4).
That’s a lot of money in forgotten accounts, and if you want to prevent yourself from adding to those numbers, be sure to pay attention to your 401(k) as you leave one company for another.
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The Wall Street Journal (1); Retirement Clearing House (2); CNBC (3); Investment (4).
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
