A rollover is generally a transfer of assets from a retirement plan maintained by your former employer (it may be possible to roll over certain in-service distributions from an existing employer's profit-sharing plan as well). Rollovers from an employer-sponsored retirement plan can take one of four forms:
- A transfer from your old retirement plan directly to an IRA trustee (this is a type of direct rollover)
- A transfer from your old retirement plan to you, and then, within 60 days, from you to an IRA trustee (this is a type of indirect rollover)
- A transfer from your old retirement plan directly to the trustee of the retirement plan at a new employer (this is a type of direct rollover)
- A transfer from your old retirement plan to you, and then from you to the trustee of a retirement plan at a new employer (this is a type of indirect rollover)
Generally, rollovers come from defined contribution plans. A defined contribution plan is a retirement plan in which contributions are based on a set formula (e.g., a percentage of the employee's pretax compensation), while the payout is based on total contributions and investment performance. The 401(k) plan is the most common type of defined contribution plan.
If a rollover is done properly and all rules are followed, there will be no taxes or penalties imposed on the retirement plan distribution. In addition, a rollover encourages retirement savings by allowing you to continue tax-deferred growth of the funds in the IRA or new plan. When you are eligible for a rollover from your plan, the plan administrator must send you a timely notice explaining your options, the rollover rules, and related tax issues.
Contact one of our experts to help you with your rollover by calling 888-547-6541 or email us at firstname.lastname@example.org.