Rollovers

What are rollovers?

If you change jobs, your employer retirement plan may also end with your employment and the employer may issue you a distribution. You may receive the total distribution of your retirement fund or you may transfer it into another qualified retirement plan called a rollover.

Direct rollovers, no tax withheld

The simplest rollover is for the administrator of the old plan to transfer the assets directly to your new plan.

If you receive the distribution, you must complete the rollover by the 60th day after the day received. The direct rollover option is generally to your advantage because no tax must be withheld.

Receiving distributions from employer retirement plan

If you choose to receive the distribution, it is taxable in the year you receive it unless you roll it over to a new plan or a traditional IRA within 60 days. The plan administrator must withhold income tax of 20% from the taxable distribution paid to you. This means that in order to have a full rollover you would have to replace the 20% withheld from other funds. In addition, if you fail to transfer the distribution to a new qualified retirement plan within the allowed time, the distribution is taxable.

Do I have to pay tax on the rollover amount?

You do not pay tax on the amount that you roll over.

Can I roll over the required minimum distribution?

A required minimum distribution is not eligible to be rolled over into a new plan.

New tax law for rollovers of inherited IRAs

A beneficiary who is not the spouse of a decedent may , after 2006, roll over tax free all or some of the inherited distribution into an IRA set up to receive it. The rollover must be dine by trustee-to trustee transfer. Prior to 2007, only the surviving spouse could roll over a decedent' s retirement plan into one for him or herself.