IRA Rollover

When you move an eligible employer retirement plan account into a Rollover IRA, you're conducting a rollover. There are two types of rollovers, direct and indirect, and each has its own tax consequences. That means you may be subject to federal income tax withholding on these distributions.

If you're moving funds directly between two accounts, such as from a Roth IRA to another Roth IRA with a different custodian, you are conducting a transfer of assets. These can take place as often as you like and are not reported to the IRS since you never take possession of your assets.

Most custodians do not charge fees to maintain a Rollover IRA. Fees are applied when trading stocks or mutual funds, the same as with other IRAs.

Eligible accounts include 401(k) plans, 403(b) plans, profit-sharing plans, money purchase plans, and QRPs. Other benefit plans, including stock ownership plans, may not be eligible.

Some other funds, like after-tax dollars and governmental 457(b) distributions, may be eligible as well, but you should contact your plan administrator to confirm eligibility.

A direct rollover is the preferred way to transfer an employer-sponsored plan. The assets are transferred directly from your previous plan administrator to your new financial provider, which means you never take possession of your assets and are not subject to the 20% federal tax withholding.

With indirect rollovers, you're transferring the assets to yourself and then to your new financial provider, which means you'll likely be subject to a 20% tax withholding by your employer. That said, if the assets are placed into another eligible plan within 60 days of receiving your distribution plus the 20% your employer deducted, you can recover the funds in the form of a tax credit when you file your next tax return.

Deposit the check directly into your Rollover IRA, with your Rollover IRA account number on the check. If you do this within 60 days you can avoid any additional taxes or penalties.

If your plan administrator withheld federal income taxes from your distribution, you can recover the deduction on your next tax return by depositing your distribution and the deducted withholding.

Please see IRS Publication 590 or talk with your tax advisor for more details.

Reaching out to Human Resources is a good place to start. If you are still able to contact your plan administrator directly, they can assist you in sending your assets directly to us. If you're unable to do this, contact us and we will work with them to make sure your account is rolled over properly.

Yes, you are responsible for tracking your contributions for tax purposes. Rollovers are tax-reportable and should be listed on IRS form 1099-R for the amount of your distribution and Form 5498 for the amount contributed to your rollover.

You can make new contributions to your IRA, but this may limit your ability to roll it into a new employer-sponsored plan if you plan to find another job. Check with your new employer regarding their plan rules to ensure that any additional contributions will not hinder your ability to roll your previous retirement account into a new one.