Rollover or transfer?
Client had 401K & check was issued to the insurance company as a direct rollover. Broker did not complete correct paperwork to Insurance company & did not respond to attempts by ins company to get corrected paperwork. After 71 days Insurance company sent client a check made payable to him. If he deposits check into his account & writes a check for same amount to the new IRA custodian is that considered a rollover since the account was never established at the Insurance company or a transfer because the check came from the IRA & sent to client in form of check?
Permalink Submitted by Laura Bultman on Fri, 2008-04-25 20:28
I’m pretty sure at this point he’s out of luck because it has gone beyond 60 days. Had it been prior to 6o days it would’ve qualified as an indirect rollover. When redepositing the money the RMD would have to be deducted first and if full amount is not redeposited by aggregating funds the amount less than the original would be taxed. Don’t quote me on all this, I’m still learning 🙂
Permalink Submitted by Al Fry on Fri, 2008-04-25 22:12
The 60 day period started when he received the check, not when they sent the check to the insurance company. So he may be ok. However if he wants a complete rollover, he’ll have to add the 20% taxes witheld to the rollover. I think the rollover coming from aq QRP is exempt from the one rollover per year rule. Alan can confirm that. And yes, if he is over 70 1/2, the RMD is not rollover eligible.
Permalink Submitted by Alan Spross on Sat, 2008-04-26 02:11
I suspect that the 401k plan administrator still assumes the direct rollover was completed and will issue a 1099R with the “G” code. There should have no original withholding with the expectation that the direct rollover would be completed.
It was not clear if the insurance company is treating this as an IRA distribution or not. Either way, the 60 days would not start until the client received a check that he could cash. But if the insurance company reports this as an IRA distribution, he will have used up his rollover for the next 12 months for the IRA that eventually receives the funds.
Permalink Submitted by Al Fry on Sat, 2008-04-26 11:53
I misread. I thoght he got the check from the 401(k). The insurance company should correct this. Scrivener’s error.