You just quit. Or maybe you got fired. Either way, you’re staring at a stack of paperwork from your former employer's HR department about your retirement plan. Among the dense legalese and the "action required" notices, you see a reference to keeping 13 old cover—which, in the jargon-heavy world of ERISA (Employee Retirement Income Security Act) and benefits administration, usually refers to the specific election to maintain your 401(k) assets under your previous employer’s plan rather than rolling them over.
Most people panic. They think they have to move the money immediately or it vanishes into some federal ether. That is a myth.
Actually, if your balance is over $5,000—a threshold that recently saw some legislative shifts under SECURE 2.0—you usually have the legal right to stay put. But is keeping 13 old cover actually the smart play? Honestly, it depends on whether you're being eaten alive by administrative fees or if you’ve accidentally stumbled into a goldmine of institutional-class mutual funds that you can't get anywhere else.
The Reality of Keeping 13 Old Cover vs. Rolling Over
Let's be real: the financial services industry wants your rollover. Every "wealth manager" at a big-box brokerage is salivating at the thought of you moving that old 401(k) into an IRA under their management. Why? Fees. In an IRA, they can often charge you a percentage of assets. Inside your old company's 13-coded plan, you might be paying pennies on the dollar because your former employer had the collective bargaining power of 50,000 employees.
If you decide on keeping 13 old cover, you’re essentially staying a "dormant" participant. You can’t contribute new money. You can’t get a company match anymore. But you can let that capital sit in high-performing, low-cost institutional funds.
Take a look at the "Rule of 55." This is a massive, often overlooked nuance. If you leave your job in the year you turn 55 (or 50 for some public safety workers), the IRS allows you to take penalty-free distributions from that specific 401(k). If you roll that money into an IRA, you lose that privilege and have to wait until 59.5. By keeping 13 old cover, you maintain a bridge to early retirement that an IRA would effectively burn down.
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When Your Old Plan Is Actually a Trap
Not every plan is worth saving. Some small-business 401(k)s are atrocious. I’m talking about 1.5% expense ratios and "wrap fees" that suck the life out of your compound interest. If you stay in a plan like that, you are actively losing money.
Check your Summary Plan Description (SPD). It’s a boring document. Read it anyway. Look for the "Fee Disclosure" section. If you see terms like "Asset-based audit fees" or "Per-head recordkeeping charges" being passed directly to you now that you’re an ex-employee, it’s time to go. Some companies stop subsidizing the administrative costs for former employees. Suddenly, keeping 13 old cover goes from being a convenience to a tax on your inertia.
Also, consider the "Net Unrealized Appreciation" (NUA) strategy. If you have highly appreciated company stock in that old plan, do not move a single cent until you talk to a tax pro. If you roll that stock into an IRA, you turn what could have been a capital gains tax rate into an ordinary income tax rate. That mistake can cost six figures. Keeping that old cover allows you to execute an NUA distribution later, potentially saving you a fortune.
The Logistics Nobody Tells You About
Managing multiple accounts is a mental tax. You have your new job’s 401(k), maybe an old one from 2018, and this "13 cover" plan from the job you just left.
What happens when you change your address? You have to notify three different custodians. What happens when you die? Your spouse has to hunt down three different pots of money. There is a "simplicity dividend" to rolling over. But simplicity shouldn't cost you 1% of your net worth every year in higher fees.
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Institutional shares (like Vanguard’s Admiral shares or certain BlackRock pools) often require a $5 million minimum investment for individuals. But inside a large corporate plan, you get them for a $500 balance. That is the primary argument for keeping 13 old cover. You are piggybacking on a giant corporation's Negotiated Rates.
Practical Steps for Your Old Assets
Don't just leave the money because you're lazy. That’s how accounts get marked as "unclaimed property" and sent to the state treasury after a few years of "lost participant" status.
- Download your most recent statement. Look at the individual holdings. If you see "Institutional" in the name of the funds, you're likely getting a deal.
- Compare the Expense Ratios. If your old plan's S&P 500 index fund costs 0.02% and your new one costs 0.10%, stay. If it's the other way around, move.
- Check for a "Self-Directed Brokerage Option" (SDBO). Some old plans allow you to open a window to trade almost any stock or ETF while keeping the money inside the 401(k) umbrella. This is the best of both worlds.
- Update your beneficiaries. This is the #1 mistake. People keep the old cover but leave their ex-spouse as the beneficiary. The plan administrator doesn't care about your divorce decree; they care about the piece of paper on file.
The bottom line is that keeping 13 old cover is a defensive maneuver. It buys you time to decide if your new employer’s plan is garbage or if you need a specialized IRA. It preserves the Rule of 55. It keeps you in low-cost funds. But it requires you to be an active manager of your own history.
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Stop looking at it as a "leftover" account. It's a strategic asset. Treat it with the same scrutiny you gave your salary negotiations. If the fees are low and the funds are strong, leave it alone and let the market do the heavy lifting. If not, get out.
Next Steps for Your Strategy
Immediately log into your former employer’s benefits portal and download the "Participant Fee Disclosure" document (usually under the 'Plan Information' or 'Library' tab). Compare the total expense ratios of your current holdings against a standard low-cost IRA equivalent; if the gap is wider than 0.25% in the plan's favor, maintaining the account is likely the mathematically superior choice. Ensure your contact information is updated to avoid the account being flagged as abandoned, which can trigger forced liquidations and massive tax bills.