401(k) de minimus distribution and indirect rollover to 401(a)
Dear Alan et al,
My client Will received a de minimus distribution from a 401(k) plan. Here is the information:
Gross distribution……………… $959.10
Federal tax withheld……………$191.82
Amount of check………………..$767.28
Fidelity will not stop payment on the check and issue a new one so our plan is for him to deposit the check for $767.28 into an IRA as a “rollover deposit from a qualified plan” and also write a personal check for $191.82 to make up for the tax that was withheld.
Would the personal check also be coded as a “rollover deposit from a qualified plan”?
Finally, the plan is to roll the funds from the IRA into his 401(a) at work which Fidelity confirmed is possible.
Thanks,
Chris
Permalink Submitted by Alan - IRA critic on Sun, 2016-03-13 00:47
Yes, the entire 959.10 will be reported as a rollover contribution on Form 5498. But when the IRA is rolled into the 401a those plans do not issue a 5498 reporting rollover contributions, so client must be sure to include an explanatory statement with the tax return explaining the IRA to 401 rollover.
Permalink Submitted by Christopher Combs on Wed, 2016-03-16 18:30
Thank you, Alan. I assume that the indirect rollover to the IRA followed by the direct rollover to the 401(a) does not violate the once-per-year rollover rule, correct?
Permalink Submitted by Alan - IRA critic on Wed, 2016-03-16 19:34
Correct. Neither one of these rollovers counts against the one rollover rule, as that rule only applies to rollovers where an IRA account is on both ends of the distribution-rollover.