Ok, I was confused about that... I thought I had read that if I cashed out, I would then be taxed. But I see what you are saying.
The new fund would receive the cash but it would be considered a rollover so no tax would be due unless you're rolling it into a Roth IRA.
Is there any advantage to paying the taxes now and putting it into a Roth IRA as opposed to a regular IRA?
The advantage to a Roth IRA is that you pay no tax on the earnings and the appreciation of the account. If you're a young man, it makes sense to pay the tax up front on your contributions and then pay no tax on the accumulated earnings for 30-40 years. I wish I had had that option when I was younger.
The rules for rolling money into a Roth IRA are somewhat complicated. For one thing, you need to come up with the amount of the income tax out of pocket and not from the account itself. I think I would look at either leaving the money where it is or rolling it into another 401K and then opening a new Roth IRA and making your future contributions to it.
This post was edited on 1/3 at 11:13 am