401a transfer to IRA
87 year old retiree asked Custodian of his 401a plan can he transfer his 401a (not 401k) to an IRA as a tax-deferred rollover or transfer and was told it is only allowed if done as taxable transaction. I thought all Custodians will issue a check which can be deposited into an IRA with no tax liability if done within 60 days. The Custodian is one of the largest, best known Custodians. I suspect the retiree didn’t understand the conversation. Has there ever been a situation where a 401a can’t have a tax-deferred transfer or rollover to an IRA, and where the Custodian insists that it would be fully taxable? The account holder has enough spare cash that he could accept tax withholding upon withdrawal and then pay out of pocket into the IRA the amount of tax withheld if that is the only way to do a transfer.
Permalink Submitted by Alan - IRA critic on Thu, 2014-08-14 23:20
He may have misunderstood as you suspected. A 401a is a qualified DC plan and direct rollovers cannot be denied for those eligible for distributions. Of course, his RMD for the year cannot be included in any rollover. Of course, it is possible that it is NOT a 401a. For example a non govt 457 plan cannot be rolled over to an IRA. It may also be worthwhile to elevate the discussion to a higher level rep of the custodian, since it is also possible that the rep is confused over one thing or another. Something is missing here.