Common 401(k) Rollover Errors The Southern Company Employees Should Avoid

Healthcare Provider Update: The Southern Company's healthcare provider is generally managed through an employer-sponsored health plan, which typically relies on insurers such as Aetna or Cigna, although specific arrangements can vary. As we approach 2026, significant healthcare cost increases are anticipated due to a multitude of factors affecting the Affordable Care Act (ACA) marketplace. With some states projecting premium hikes of over 60%, the expiration of enhanced federal subsidies is expected to push monthly costs for many enrollees up by more than 75%. This unprecedented rise in premiums combined with ongoing inflation in medical costs, driven by higher hospital and drug prices, creates a complex financial landscape for consumers navigating their health insurance options in the coming year. Employers like The Southern Company may need to strategize effectively to mitigate the impact of these escalating costs on their employees' healthcare coverage and overall well-being. Click here to learn more

'The Southern Company employees often face complex rollover decisions that can affect their retirement outcomes. To help avoid unnecessary taxes or penalties, it's important to understand rules like the 60-day window, the Rule of 55, and NUA strategies before moving assets.' — Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

'The Southern Company employees transitioning from their company plans need to understand rollover details such as timing, tax treatment, and NUA opportunities to help preserve long-term retirement value.' — Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. Common rollover mistakes that can trigger taxes and penalties.

2. Special rules like the “Rule of 55” that can help early retirees.

3. How The Southern Company employees who own company stock can realize tax advantages through Net Unrealized Appreciation (NUA).

By Brent Wolf, CFP®, Wealth Enhancement

Transferring retirement savings from a 401(k) to an IRA can offer greater investment flexibility and control, but missteps during this process could lead to unnecessary taxes, penalties, or lost opportunities for growth. Thoughtful planning and awareness of the rules can help The Southern Company employees steer clear of these costly mistakes.

1. Missing the 60-Day Rollover Window

When leaving a company like The Southern Company, you may decide to move your 401(k) into an individual retirement account (IRA). There are two ways to move your funds: through a direct transfer or a 60-day rollover.

With a direct transfer, your 401(k) provider sends the funds directly to your IRA with no tax withheld. However, if you receive a check instead, you must deposit that amount into your IRA within 60 days. Missing that deadline can result in taxes being due and, if you’re under age 59½, a 10% early withdrawal penalty.

Additionally, your plan administrator may withhold up to 20% for federal taxes. For example, if you’re rolling over $10,000, you might receive only $8,000. To avoid tax on the withheld portion, you must deposit the full $10,000 into your IRA within 60 days—using other funds to cover the $2,000 difference until you’re refunded at tax time.

2. Overlooking the Rule of 55

Employees who leave The Southern Company during or after the year they turn 55 may be able to use the “Rule of 55” to withdraw money from their 401(k) without the 10% early-withdrawal penalty (although ordinary income tax still applies).

This exception applies only to the 401(k) tied to the employer you just left—not to IRAs. If you roll your 401(k) into an IRA, that benefit is forfeited and the standard age-59½ rule applies. For public safety workers, the qualifying age may be as early as 50.

3. Missing Out on The Southern Company Stock Tax Advantages

If you hold The Southern Company company stock inside your 401(k), you may be able to use the Net Unrealized Appreciation (NUA) strategy. With NUA you move company stock directly from your 401(k) into a taxable brokerage account, paying ordinary income tax on the original cost basis only. The appreciated portion is then subject to long-term capital gains tax when sold—typically a lower rate.

For example, if your company stock cost basis was $300,000 and it has grown to $3 million, only $300,000 is taxed as ordinary income when distributed; the $2.7 million in growth is taxed later at long-term capital gains rates.

However, if you roll that stock into an IRA through a direct rollover, you lose the NUA benefit—all future withdrawals would be taxed as ordinary income.

Plan Thoughtfully and Seek Guidance

Even seasoned investors can miss key details of a 401(k) rollover. The Southern Company employees nearing retirement may benefit from professional guidance to navigate complex tax rules, refine rollover strategies, and make informed decisions about their pension and savings.

The Retirement Group helps corporate professionals address retirement transitions and rollovers. To discuss your options, call (800) 900-5867 to speak with an advisor familiar with The Southern Company benefits and retirement programs.

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Sources:

• 1. Adams, Hayden. “When Can You Withdraw? 401(k)s and the Rule of 55.”  Charles Schwab , 1 Apr. 2025,  www.schwab.com/learn/story/retiring-early-5-key-points-about-rule-55 . Accessed 17 Nov. 2025.

• 2. Ellis, Donna. “401(k) Rollover Rules: How to Avoid Costly Mistakes.”  Creative Planning , 5 Nov. 2025, creativeplanning.com/insights/financial-planning/401k-rollover-rules-avoid-costly-mistakes/. Accessed 17 Nov. 2025.

• 3. Hayes, Adam, Ph.D., CFA. “Net Unrealized Appreciation (NUA): Definition and Tax Treatment.”  Investopedia , 14 May 2025,  www.investopedia.com/terms/n/netunrealizedappreciation.asp . Accessed 17 Nov. 2025.