What happens to contributions if an employee leaves the company?

When an employee leaves the company, the contributions they made to their 401(k) plan generally remain in the plan until the employee takes action. This is based on the design of most 401(k) plans, which allow for an employee's account to stay intact even after termination. The employee has the option to leave the funds in the plan, roll them over to another qualified retirement plan or an individual retirement account (IRA), or take a distribution.

The ability to keep the funds in the 401(k) plan can be advantageous for employees as they can continue to benefit from tax-deferred growth on their investments. Moreover, employees often have flexibility in managing their retirement savings and can choose the most suitable option when it comes to accessing or transferring their funds.

This approach provides stability and ensures that the employee's retirement savings continue to grow until they decide how they want to manage those funds after leaving their job.