Current Employer 401K Distribution to Rollover Self Directed IRA awl

Submitted by Kevin WOlter on Tue, 2020-12-15 19:16

Hi,

I have a 401K with my current employer. However, I have very little control over how the funds are invested.

I have been researching ways that I can get access to these funds in order to invest them how I see fit.

I have learned that under the current “coronavirus-related relief for retirements plans” I can take a withdrawal of up tp $100k from my current employer 401K plan without having to pay the 10% penalty fee.

My personal broker thinks that I can then deposit these funds directly into a self directed IRA and by doing so I will not have to pay federal and state taxes.

Here are my questions:

1. Is this accurate?
2. If yes, do I need to explain what I am doing to my current 401K provider or would I just request the distribution?
3. Are there any forms I need to fill out or anything I need to do to ensure this is not flagged as a distribution by the fed and state?

Thank you!
Kevin



Submitted by Alan - IRA critic on Tue, 2020-12-15 19:33

  • You can do that as long as you qualify for a CRD (check Notice 2020-50), and your current plan supports CRDs. If your 401k plan allows CRDs, all you have to do is request it and file a W-4P to decline any withholding.  The deadline for CRD distribution is 12/30/2020. You can then “repay” the CRD into an IRA and report the CRD and the repayment on Form 8915 E. There will be no tax or penalty. You must advise the IRA custodian of the repayment, since they must code it as such on Form 5498 to distinguish it from an ordinary rollover.
  • If your plan does not support CRDs, you likely do not qualify for an in service distribution at all.
  • Do not attempt to roll any CRD to a Roth IRA instead of a TIRA.  All indications are that this is not allowed, and you would end up with a failed conversion.

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