What are the Benefits of a Rollover/Direct Rollover/Transfer IRA?
A rollover/direct rollover/transfer IRA is designed to help you to manage your retirement funds by allowing the movement of assets from one tax-deferred retirement plan into another. For example, if you receive a distribution from your employer's retirement plan and roll it over (rollover) or directly roll it over (direct rollover) into an IRA, you benefit in two very significant ways: You avoid immediate taxation and possible penalties; and earnings on your retirement dollars grow tax deferred until withdrawn.
What Distributions Can I Rollover, Direct Rollover, or Transfer Into an IRA?
Funds received from an IRA can be rolled over or transferred to an IRA. Funds received from certain distributions from a qualified retirement plan (QRP) or a tax-sheltered annuity (TSA) can be rolled over (rollover) or directly rolled over (direct rollover) into an IRA.
How Can I Move From One IRA Into Another?
There are two ways to move an IRA from on financial institution into another: rollover and transfer. A rollover takes place when the IRA funds are paid directly to you and redeposited into an IRA within 60 calendar days or receipt. The 60-day period begins the day after you receive the payment.
A rollover transaction from an IRA may not occur more than once during a 12-month period. This 12-month rule applies to each separate IRA that you own and is determined from the date the IRA funds are received. The 12-month limitation does not apply if the funds are transferred directly from one financial institution into another or if they are rolled over (rollover) or directly rolled over (direct rollover) from a QRP or TSA into an IRA.
A transfer occurs when the funds are moved directly from the distributing IRA into another without you having direct control or custody of the funds. There are no time or frequency limits on the number of transfers permitted.
Can I Redeposit a Distribution Into the Same IRA?
Yes. The rollover can occur out of and in to the same IRA.
What Plans Qualify for a Rollover or a Direct Rollover into an IRA?
A. Pension Plan
B. Profit Sharing Plan [including a 401(k) salary reduction arrangement]
C. Stock Bonus Plan
D. HR-10/Keogh Plan
E. 403(b) Tax-Sheltered Annuity
F. Federal Thrift Savings Plan - IRC 7701(j)
Note: Only funds received from a QRP - as governed by Internal Revenue Code Section 401(a) (A,B,C,D, or F above) - or a 403(b) TSA are eligible to be rolled over (rollover) or directly rolled over (direct rollover) to an IRA.
What is a Rollover IRA?
A rollover IRA is an IRA established with funds that are distributed from a QRP or TSA and paid directly to the individual. QRP or TSA distributions occurring after December 31, 1992, are subject to a mandatory 20 percent federal income tax withholding at the time of distribution. Regardless of the source of the funds, the deposit to a rollover IRA must take place within 60 calendar days of the date the funds are received by the employee or spouse beneficiary.
What is a Direct Rollover?
A direct rollover is a QRP or TSA distribution that is sent directly from the plan administrator (employer) to an IRA. Such distributions are not subject to the mandatory 20 percent federal income tax withholding.
When Would I Receive My Funds?
A. Separation From Service - including retirement
B. Employee's Disability
C. Employee's Death - only a surviving spouse beneficiary can roll funds over into an IRA
D. Attainment of Normal Retirement Age - no earlier than age 59½
E. Plan Termination
What Portion of My QRP or TSA Distribution Can I Roll Over (Direct Rollover) Into an IRA?
Only the eligible rollover distribution - a distribution of any portion of the balance to the credit of a plan participation in a QRP or TSA - can be rolled over or directly rolled over. The amount being deposited cannot include any payments that are:
A. "Part of a series of substantially equal periodic payments" over a single or joint life expectancy of
the employee and beneficiary or for a specified period of ten years or more,
B. Nondeductible contributions (nontaxable distributions),
C. Required minimum distributions (at age 70½ and thereafter), or
D. Funds which qualify for the death benefit exclusion.
Must I Roll Over (Rollover) or Directly Roll Over (Direct Rollover) the Entire Distribution?
No. You can deposit all or a part of the taxable portion received. Funds eligible but not deposited are taxed as ordinary income and a 10 percent premature-distribution penalty may be assessed if you are under age 59½.
Should I Keep QRP or TSA Rollover of Direct Rollover Funds in a Separate IRA?
Maintaining QRP or TSA rollover or direct rollover funds in an IRA separate from your Regular IRA is only necessary if you intend to move the funds back into another QRP or TSA. Keeping funds in separate accounts may also apply in the case of an IRA-to-IRA rollover if the original IRA was established as a rollover or direct rollover from a QRP or TSA.
What if My QRP Distribution Contains Stock or Other Property?
Part or all of your QRP distribution may be in the form of stock or other property. You could deposit the same property received or sell it and deposit the cash proceeds into an IRA.
Can I Deposit My Rollover or Direct Rollover Distribution Into More Than One IRA?
Yes. More than one IRA can be used to successfully accomplish a rollover or direct rollover of an eligible rollover distribution. Your plan administrator (employer) may restrict your direct rollover to only one IRA.
Do I Pay Taxes on the Earnings of My Rollover or Direct Rollover IRA?
All earnings on your rollover or direct rollover IRA contributions remain tax deferred until you make withdrawals from the IRA.
Can a Rollover or Direct Rollover Occur After Age 70½?
Yes. There is no age restriction on a rollover or direct rollover deposit. However, mandatory distributions must begin for that taxable year, and those distributions must begin for that taxable year, and those distributions are not eligible to be rolled over (rollover) or directly rolled over (direct rollover) into an IRA.
What Happens to My Account in the Event of My Death?
Your named beneficiary(ies) will receive the entire proceeds of the account. The manner in which the account is paid can be left to the election of the beneficiary(ies).
Does a Rollover or Direct Rollover Deposit Affect My Regular or Spousal IRA Deposits?
No. Rollover or direct deposits do not affect your eligibility to fund a Regular or Spousal IRA.
How Do I Open a Rollover or Direct Rollover IRA?
Simply see any of our IRA representatives. We will explain the nature of these accounts in more detail and help you to complete the simple forms necessary to establish your rollover or direct rollover IRA.
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