How to Close an Empower 401k Account: Rollovers, Penalties, and Forms

To close an Empower 401k account, confirm how much of the balance is vested, resolve any outstanding loan, choose whether to roll the money over or take it as cash, and submit Empower’s distribution request form through the participant portal. The rollover-versus-cashout choice is the one that decides your tax bill, so make it before you fill out anything.

Confirm What You Actually Own

Your own paycheck contributions are always 100% yours. Employer contributions, including matching funds, may follow a vesting schedule that ties ownership to years of service. Plans typically use cliff vesting (nothing until you hit a milestone like three years, then 100%) or graded vesting (a rising percentage each year until you reach 100%, often at six years). Anything not yet vested is forfeited when you close the account.1Internal Revenue Service. Retirement Topics – Vesting

Your vesting percentage shows on the Empower dashboard and on quarterly statements. If you are close to a milestone, waiting a few weeks to close can materially change what you walk away with.

Deal With an Outstanding 401k Loan First

If you still owe on a 401k loan and cannot repay it after leaving the employer, the unpaid balance is treated as a taxable distribution.2Internal Revenue Service. Retirement Topics – Plan Loans Under 59½, the 10% early withdrawal penalty can apply on top of income tax.

There is a way to avoid that hit. A loan offset at termination is an eligible rollover distribution, so you can roll an amount equal to the offset into an IRA or another qualified plan by your tax-filing deadline (including extensions) for the year of the offset. No 20% withholding applies to the offset itself, because no cash actually moves.3Internal Revenue Service. Plan Loan Offsets

Choose How to Take the Money Out

Empower offers several distribution options, though not every plan includes all of them. Check your plan documents or call participant services to confirm what’s available.

Direct Rollover

A direct rollover sends the balance straight to a Traditional IRA, Roth IRA, or your new employer’s plan. The money never touches your hands, no taxes are withheld, and the balance keeps growing tax-deferred.4Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions This is the cheapest way to close the account if you don’t need the cash. You’ll need the receiving custodian’s legal name, mailing address, and account number. Empower will make the check payable to that custodian, not to you.

Indirect (60-Day) Rollover

Here Empower pays the distribution to you, and you have 60 days to deposit it into another eligible retirement account. The catch: Empower must withhold 20% for federal taxes before sending you the remaining 80%.5Office of the Law Revision Counsel. 26 USC 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income To roll the full amount and avoid tax on any of it, you have to redeposit the entire original balance, including the withheld 20%, from your own pocket. You get the 20% back at tax time, but the gap trips people up.

Miss the 60 days and the whole distribution becomes taxable income for the year, plus the 10% penalty if you’re under 59½. The IRS can waive the deadline in limited situations involving circumstances beyond your control.4Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions

Lump-Sum Cash Distribution

Take the balance as cash and Empower withholds 20% federal upfront.5Office of the Law Revision Counsel. 26 USC 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income The full distribution then gets added to your taxable income for the year, which can push you into a higher bracket. Under 59½, add the 10% early withdrawal penalty on the taxable portion unless an exception applies.6Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts

Annuity Purchase

Some plans let you convert the balance into an annuity paying you over a set period or for life.7Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules Payments are taxed as ordinary income in the year received if the contributions were pre-tax.

Roth 401k Balances

If any of your balance is designated Roth, treat it separately. A qualified distribution from a Roth 401k is fully tax-free, including earnings, if you’re at least 59½ and at least five years have passed since your first Roth contribution to the plan.8Internal Revenue Service. Retirement Topics – Designated Roth Account Before you meet both conditions, the earnings portion is taxable and can carry the 10% penalty. Roll a Roth 401k directly into a Roth IRA to keep the tax-free treatment intact.

The 10% Early Withdrawal Penalty and Its Exceptions

A taxable distribution before age 59½ triggers a 10% additional tax on top of ordinary income tax.6Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts On $50,000, that’s $5,000 in penalty alone. Several situations waive the penalty (but not the income tax):9Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions

  • Leaving your employer during or after the year you turn 55 (age 50 for qualifying public safety employees), for distributions from that employer’s plan.
  • Total and permanent disability.
  • A series of substantially equal periodic payments continued for at least five years or until you reach 59½, whichever is longer.
  • Payments to an alternate payee under a qualified domestic relations order.
  • Unreimbursed medical expenses above 7.5% of adjusted gross income.
  • Distributions forced by an IRS levy on the plan.
  • Qualified birth or adoption expenses, up to $5,000 per child.
  • Terminal illness certified by a physician.
  • Up to $22,000 for a qualified individual affected by a federally declared disaster.

Small Balance Rules to Watch

If you leave your job and ignore Empower’s distribution notices, the plan can act on its own once your balance is small enough. Balances of $1,000 or less can be cashed out and mailed to you. Balances between $1,001 and $7,000 must be automatically rolled into an IRA with a designated trustee if you don’t elect otherwise.10Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans Above $7,000, the plan generally can’t distribute without your consent.7Internal Revenue Service. 401(k) Resource Guide – Plan Participants – General Distribution Rules Auto-rollover IRAs typically default to conservative money market or stable value funds, and tracking them down later is a hassle. Choosing your own destination avoids it.

What You’ll Need to Submit

Empower processes closures through a distribution request form, available in the participant portal’s forms library or by calling participant services. Have the following ready:

  • Your plan name and plan number, both on your quarterly statements.
  • Bank routing and account numbers for ACH, or a current mailing address for a check.
  • The receiving custodian’s legal name, address, and account number if you’re doing a direct rollover.
  • Your federal and state tax withholding elections on any taxable portion.

Spousal Consent

Married participants with a vested balance over $5,000 generally need written spousal consent for the chosen distribution method, witnessed by a plan representative or notary.11Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Obtain Spousal Consent At or below $5,000, spousal consent isn’t required. Empower offers digital notarization on some plans for $25.

QDROs

If a qualified domestic relations order divides your 401k in a divorce, the plan can’t distribute the affected portion to you. A QDRO directs payment of a share to an alternate payee, usually a former spouse, either as a separate lump sum or as a slice of each payment.12U.S. Department of Labor. QDROs Under ERISA – A Practical Guide to Dividing Retirement Benefits A pending or active QDRO has to be resolved with the plan administrator before closure can finish.

How Submission and Payment Work

Before Empower can process any eligible rollover distribution, you’ll receive the 402(f) notice, a written explanation of your rollover options, tax consequences, and direct transfer rights, at least 30 days before payment. You can waive the waiting period to speed things up.13Internal Revenue Service. Safe Harbor Explanations – Eligible Rollover Distributions (Notice 2026-13)

Log in to the participant portal and go to the withdrawals or distributions section. Some plans allow full online completion with an electronic signature. Others require you to download the form, sign it, and upload it, or mail a paper copy to Empower’s processing center. Use a trackable service if you’re mailing.

After Empower receives the request, the plan sponsor reviews it, confirms your vesting and eligibility, and checks for plan-specific restrictions. That review takes several business days. Once approved, Empower liquidates your investments and pays out by direct deposit or check. Start to finish, expect one to three weeks; spousal consent, an outstanding loan, or a QDRO can stretch it further.

Fees

Empower may charge fees depending on your plan’s schedule. Common ones include roughly $40 for a wire transfer and about $25 for digital notarization.14Empower. Participant Fee Disclosure Notice ACH transfers and standard mailed checks usually carry no additional distribution charge. Your plan’s fee disclosure notice in the portal has the exact amounts.

If You’re Already Taking RMDs

At 73 or older, required minimum distributions begin by April 1 of the year after you turn 73, and continue annually.15Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Still working for the sponsoring employer and not a more-than-5% owner? You can generally delay RMDs until actual retirement.

Missing an RMD triggers a 25% excise tax on the shortfall, dropping to 10% if corrected within two years.15Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Take any RMD owed for the current year before rolling the rest over. RMD amounts can’t be rolled over.

The 1099-R You’ll Get in January

By January 31 of the year after closure, Empower sends you Form 1099-R.16Internal Revenue Service. General Instructions for Certain Information Returns – For Use in Preparing 2026 Returns Box 7 carries a distribution code telling the IRS how to treat the payout. The ones that matter most for a closure:

  • Code G: direct rollover to an eligible retirement plan (not taxable).
  • Code H: direct rollover of a designated Roth to a Roth IRA (not taxable).
  • Code 1: early distribution, no known exception (taxable, penalty applies).
  • Code 2: early distribution with an exception (taxable, no penalty).
  • Code 7: normal distribution at 59½ or older (taxable, no penalty).
  • Code M: qualified plan loan offset (taxable unless rolled over by your filing deadline).

If you did a direct rollover, the 1099-R should show the full amount in Box 1 and $0 in Box 2a. Check it against your records. A wrong code or taxable amount means calling Empower for a corrected form before you file.17Internal Revenue Service. Instructions for Forms 1099-R and 5498 Keep the final account statement with the 1099-R in your tax records.