what is a 60 day rollover ?
I know this is a simple question but I have a client who is now an ex employee of a 401(k) Plan and was issued a check made payable to NY Life based on her instructions. now she comes to find out that rates have changed at NY life and client changed her mind and she wants the check reissued to a new company . old employer is telling her about the 60 day rollover and how even if they issue a new check to new company clock has already started ticking on the 60 days. I thought 60 days only was important if check was made payable to the client and not to another financial institution. Could you comment on that?
Permalink Submitted by Jose Morales on Thu, 2009-05-14 17:03
The 60 day rule does not apply to Direct Rollovers. I would have to check, but it may be that Direct Rollovers are irrevocable, and therefore the issuing plan administrator may only be able to reissue a check in the event that the first check was lost or stolen and not simply because the client wants to change their mind about where the funds end up. It would have been a lot easier for this client to just complete the direct rollover and then took a distribution the same day that they could have rolled over to an IRA at the new financial institution that they now like.
Permalink Submitted by Alan Spross on Thu, 2009-05-14 17:45
I agree that the 60 day rollover period is not applicable to a direct rollover. Following is a link (Denise Appleby’s Retirement Dictionary) that strongly suggests this is the case with respect to the “rollover” as the second portion of a direct rollover. The first is the distribution.
http://www.retirementdictionary.com/definitions/rollovercontribution
Potential problems here is that Sec 401k(31) only requires the employer to provide ONE direct rollover, so old employer could refuse further action. However, if old employer is willing to void the returned check and issues a replacement check made out to the employee, the 60 day period would apply starting with the receipt of that check by the employee because the employee would then have to complete an indirect rollover. For whatever reason, many administrators of qualified plans state that a direct rollover check is subject to the 60 day limit for getting the check into the hands of the IRA custodian. The basic reason for the 60 days is to limit the period of time that a taxpayer has personal use of tax deferred funds. With a direct rollover check, there is no possiblity of such personal use, thus no need for the 60 day deadline.