indirect rollover
Individual requested in service distribution from employer plan to TIRA as direct rollover. The custodian issued the check in name of IRA owner and custodian, example: Jim Smith and Fidelity. Would this be considered a direct rollover or indirect rollover.
Permalink Submitted by Alan - IRA critic on Sun, 2019-07-28 15:19
The payee should be “Fidelity Investments FBO Jim Smith IRA” or similar. The payee you cited is too general and therefore creates a question on how the employer plan will treat it. The 1099R needs to be coded G for direct rollover in order to avoid a taxable distribution and mandatory 20% withholding. Fidelity will issue a 5498 either way if they deposit it in an IRA, but the risk on Fidelity’s end is that the check might not end up in the right account. The individual should immediately contact the plan administrator to be sure they are coding this as a direct rollover, will not withhold, and will report the code G on the 1099R. If the check is being sent to the individual to forward to Fidelity, they should first call FIdelity to determine what instruction they should provide to FIdelity to make sure that the check is deposited in the correct IRA, particularly if the individual also has a Roth IRA at Fidelity.