When you leave a job, your 401k balance is yours to keep — that much is clear. But what your former employer can and cannot do with your account often surprises people.
Vested contributions (both your own and any employer match you've earned) remain yours regardless of how you left the company. Unvested employer contributions, however, revert to the company according to the plan's vesting schedule.
The Balance Thresholds That Matter
The size of your 401k balance at your former employer determines your options:
Under $1,000: Your former plan can distribute the balance directly to you as a check. This triggers immediate withholding and potential tax penalties.
$1,000–$5,000: The plan must offer you the option to roll over, but if you don't respond, they're permitted to auto-roll the funds into an IRA at an institution of their choosing — often with conservative default investments.
Over $5,000: The plan must keep your account open and invested until you request a distribution or rollover. You have full flexibility.
Your Four Options
When you leave a job with a 401k balance, you have four paths: leave it where it is, roll it to your new employer's plan, roll it to an IRA, or take a cash distribution. The last option is almost never advisable given the tax consequences — but the other three each have merit depending on your situation.