Rollover Frequently Asked Questions (FAQs)
What is a rollover?
A rollover is a tax deferred movement of your retirement savings from a former employer’s retirement plan (457, 401, 403(b), etc.) into another plan qualified to accept such contributions, such as an Individual Retirement Account (IRA) or another employer’s retirement plan.
What is a direct IRA rollover?
A direct rollover occurs when you instruct your former employer to pay amounts from your account to your IRA custodian for deposit into your IRA. A direct IRA rollover helps you avoid any potential early distribution taxes or penalties that could occur with an indirect IRA rollover.
What is an indirect IRA rollover?
An indirect rollover occurs when you take a distribution of your retirement savings from one of your qualified retirement plans. When your former employer writes the check to you, they are required to automatically withhold 20 percent for taxes. You then deposit that check into your own account.
You have 60 days from distribution to roll over all or a portion of your distribution into an IRA. If you want to roll the total distribution amount (including withholding) into an IRA, you would have to personally deposit (out of pocket) the 20 percent tax withholding that was deducted from your distribution. Any portion not rolled over into the IRA, including the 20 percent withholding, would be considered a taxable distribution, and you may owe income tax plus potentially a 10 percent early withdrawal penalty, if it applies to you based upon your age and retirement date. IRA owners receive a Form 1099R to report the distribution and a Form 5498 to report the rollover. An indirect IRA rollover is allowed once every 12 months.
How do I roll over my plan?
- Log on to the IRA Wizard and do it yourself, or
- Contact us and we’ll guide you through the process
Will I owe taxes on my rollover?
You will not owe taxes on a direct rollover (see "What is a direct rollover?") from your former employer’s plan into an IRA.
Will I need to report a rollover on my tax return?
Yes. As a result of your rollover, you will receive two tax forms — an IRS Form 1099R which reports that you took a distribution from your former employer's plan and an IRS Form 5498 which reports that you made a rollover contribution to your IRA. Even if no portion of your rollover is taxable, you must report it on your tax return.
Will I be able to combine my rollover and annual contributions into one IRA?
Yes, you can combine rollovers and contributions in the same account. However, you are required to keep Traditional IRA and Roth IRA money in separate accounts.
My spouse has money in her former employer's plan. Can that be rolled over to an IRA?
Yes, spouses of public sector employees can establish an IRA and roll over retirement savings from former employers' plans.