408(a) Plan

Submitted by Colin O on Fri, 2023-05-19 23:05

I had an old 401k, about 2700 in it (1700 Roth, 1000 Trad) and the plan was forced rolled over in 2019 after I left the company and didn’t see the custodians communications. My statement now says the pre tax assets are in a 408(a) Plan and the after tax Roth assets are in a Roth IRA Plan. I reached out to the custodian to move the assets to my other Trad and Roth IRAs. The custodian sent me an Employer Rollover IRA Withdrawal Request for Direct Rollovers/Transfers. I filled out the forms and requested a Direct Rollover/Transfer and had the checks made payable to my new custodian. I thought these were transfers, since the assets had been removed from the 401k, but the original custodian is saying they are coding as a Direct IRA to IRA Rollover and Direct Roth IRA to Roth IRA Rollover. Couple questions below.
1) what is a 408(a) Plan? Is this still tied somewhat to the previous employer and that’s why they’re coding as rollovers?
2) will I receive a 1099R from these transactions? Need to make sure my new custodian generates a 5498 if so.
3) will these rollovers trigger the 1 rollover per year rule?
4) does having the checks made payable to the new custodian avoid the 1 rollover per year rule since they’re not indirect rollovers then?

Thanks!!



Submitted by Alan - IRA critic on Sat, 2023-05-20 18:15

  1. 408(a) is the tax code section for a traditional IRA. The funds were moved by direct transfer. A direct transfer between IRAs is not a rollover and should not generate a 1099R. Having a 1099R issued for each transfer would expose you to the one rollover limit. A “direct rollover between IRAs does not exist in the tax code, indicating the the person you talked to is not up to speed with transaction types and the correct terminology. Suggest you confirm that there will not be a 1099R issued because the funds moved by direct trustee transfer.
  2. You should not receive a 1099R. See above.
  3. Since the new custodians have accepted these transfers, if a 1099R is issued and the IRS challenges one of the rollovers, you could provide documentation to the IRS how the funds moved and the IRS should realize that no actual 60 day rollover occurred.
  4. Yes, these are direct transfers by definition. But if a 1099R is issued you might have to document to the IRS that you never received a distribution. That documentation would probably have to come from one of the custodians. Therefore, making sure that no 1099R forms are issued would be the easiest solution.
  5. If your new custodian receives a direct transfer, they will not issue a 5498 and that will create a mismatch if the old custodian issues a 1099R. 

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