Indirect Rollover
I have a client who received a check from his old 401k. Without him knowing, they closed his account, withheld the mandatory 20%, and sent him a check for the net amount. He wants to rollover the net proceeds into 2 separate IRA’s at different institutions. So, the money trails is 401k to the bank, then the bank to two IRA’s. Does this still fall into the 1 rollover per year since the funds cam from one employer plan?
Permalink Submitted by Alan - IRA critic on Wed, 2016-03-02 22:58
No. The one rollover limit only applies to IRA to IRA rollovers (other than conversions). Client can complete the two rollover contributions within 60 days of receipt but will have to replace the 20% withholding with other money to make the rollovers complete and avoid tax and penalty on the withheld amount.