Rollovers
A rollover begins with a distribution, followed by a re-contribution of all, or a portion of, the assets to another plan.
The distribution may occur between a qualified plan and an IRA. The rollover transaction must be completed within a
60-day period or the assets' eligibility to be returned to a tax-advantaged account is lost. The distribution
will then
be taxed as ordinary income in the year it was received, and if the individual that received the distribution is under
age 59½, the IRS imposes a 10% penalty on the distribution, subject to certain exceptions.
It is important for retirement plan owners considering a rollover to take extra precaution that the transaction is
completed on a timely basis, as all transactions are reported to the IRS. If the IRS does not receive confirmation
of re-contribution within the 60 day period, it will assume the transaction is a distribution, and therefore, taxable.
In some cases, rollovers are not permitted, including the following:
- More than one rollover in the same account, as in an IRA to an IRA, or
more than one same-fund transfer within a 12 month period;
- Rollovers from a SIMPLE IRA plan to a Traditional IRA during the first two years of a SIMPLE IRA’s plan participation;
- After age 70½, IRA or qualified plan rollover amounts that represent a taxpayer’s required minimum
distribution for that year; and,
- Rollover from a Roth IRA to a Traditional IRA or qualified plan.
Direct Rollover
Unlike a rollover, a “direct” rollover always originates with assets in a qualified plan, Traditional IRA, or
SIMPLE IRA, and involves movement to a Traditional IRA or another employer plan. At no time are the assets cashable or
negotiable by the taxpayer. Also, while direct rollovers are reported to the IRS as distributions, a special code on the
distribution report indicates the funds were transferred in a direct rollover to an IRA or employer plan and are, therefore,
not taxable.
We encourage IRA owners to consult with a tax advisor regarding these limitations before initiating a transaction.
To view a Rollover Chart provided by the IRS, please
click here.
 |
> Personal IRAs
> Employer Sponsored IRA
> Roth Conversion Opportunity
> Benefits of Conversion
> Important Considerations
> Real Estate Example
> Contributions
> Tax Deductibility of Contributions
> IRA Transfers
> IRA Rollovers
> Distributions from Your IRA
> Prohibited Transactions
> Unrelated Business Taxable Income (UBTI)
> Alternative Investments
> Traditional Investments
> Cash Investment Program
> FAQs
> Fact Sheets
> Glossary of Terms
> Account Forms
> Request a Distribution |
