401k to IRA transfer to annuity not taken
Client age 51 seperated service from employer. Processed a transfer of $288,000 (part of 401k) to an IRA annuity.
Upon delivery of annuity he used his free look to rescind annuity.
Annuity company sends money back to his 401k mutual fund company but instead of placing back in his 401k
they put the funds in his Individual account as they stated since he is no longer employed funds cannot go to the 401k.
Funds were deposited to the Individual account on 3-25-16.
Will this be treated as a Rollover of a Transfer?
If he puts funds in an IRA now would the IRS treat this as A Rollover of a Transfer?
Does the 60 day clock start ticking the day the money went in to his Individual account?
Permalink Submitted by Alan - IRA critic on Sat, 2016-04-02 17:12
Client should contact these custodian to determine the nature of any 1099R or 5498 forms to be issued. Not sure what is meant by “individual account” and how the 401k administrator could open one. The IRS will react according to the forms reporting the transactions. In any event, the one rollover rule only applies to IRA to IRA rollovers so the exchange between these providers does not appear to include any such activity. The 60 day rollover period should start when the individual account received the retirement funds if that account is not an IRA. Was 20% withheld from the contribution to the individual account. Is client sure this individual account is NOT an IRA?
Permalink Submitted by Don Cameron on Mon, 2016-04-04 13:49
To clarify, the 401k was with Fidelity and client had an existing Individual non IRA account with Fidelity fidelity received the funds from the Annuity company and said they could not put it back in his 401k as he was not employed, so they deposited the money to his individual account. 20% not withheld.
Permalink Submitted by Alan - IRA critic on Mon, 2016-04-04 16:08
The 1099R will probably not show a direct rollover but a distribution. Therefore, client has 60 days to roll the distribution over to an IRA. 60 days starts 3/26.