60 day rollover
Hello,
Client accidentally deposited a 401k rollover check to his personal bank account.
His intention is to move his previous 401k to his new 401k. The bank is telling him that they cannot cancel the deposit transaction.
can he still send a personal check over to his 401K carrier?
OR
can he open an IRA and send a personal check to it?
Permalink Submitted by Alan - IRA critic on Tue, 2024-07-30 11:13
Yes, he can complete the rollover with a personal check within 60 days of receipt of the distribution. Since the prior check was made out to him personally, there should have been 20% withheld for mandatory federal withholding. To have a complete rollover client will have to replace that 20% using other funds. Withholding could have been prevented if he had done a direct rollover.
I assume that the distribution did not include any Roth 401k money. If it did, the Roth portion can only be rolled over to a Roth IRA.
If the 60 days is getting close, completing the rollover to an IRA will be faster and easier than rolling to the 401k. There are also considerations when choosing between the new 401k and an IRA for the pre tax 401k distribution.
Permalink Submitted by Keith Kim on Tue, 2024-07-30 15:46
Thanks, Alan!
The initial check he deposited was actually made out to “401K company FBO client”. and their bank accepted the check anyway.. so no withholding there. also, when rolling to an IRA, they just open an account and deposit it claiming that it’s a “60-day” rollover? I’m sure the custodian knows how to recordkeep it?
Permalink Submitted by Alan - IRA critic on Tue, 2024-07-30 16:17
Banks should not be cashing these checks as the payee is not the individual – but some banks continue to ignore the rules.
The client can still make the rollover contribution, a little easier since there was no withholding. There is no conflict between the G coded 1099R from the 401k, and the 5498 from the IRA custodian showing a rollover contribution as the 5498 does not differentiate between a direct rollover and a 60 day rollover.