Retirement Plan Rollovers: What You Need to Know

Retirement Plan Rollovers: What You Need to Know

What happens when you switch to a new retirement plan? You may wish to roll money from a former plan over into the new one, but how does that work? Although rollovers may seem complicated, they are fairly straightforward, and the IRS has easy resources to guide you through the process. This easy-reference guide provides a snapshot of eligible rollover funds:

Once you’ve determined if your investments are eligible for rollover, you’ll be ready to look at why you may wish to rollover those funds and how the rollover will take place.

Reasons to Rollover

There are a number of reasons that plan participants choose to rollover investments into a new retirement plan. Some individuals roll investments over in order to enjoy a better rate of return on a plan that is performing better than the old plan. Others may choose a new plan in order to avoid the distribution complexities of an employer-sponsored plan. Some rollovers make retirement planning more convenient as they allow participants to combine assets into a single plan, which makes record keeping less complicated. Regardless of the reason that you choose to rollover a 401(k) or other retirement plan, keep in mind that certain IRS regulations will apply.

Ways to Rollover

The IRS allows for three different rollover methods:

  1. Direct Rollover: Participants requesting a distribution from a plan may request that the plan administrator make the payment directly into another plan or IRA. When this method is used, no taxes will be withheld from the transfer amount.
  2. Trustee-to-Trustee Transfer: Participants requesting an IRA distribution can request that the financial institution make the payment directly to another IRA or retirement plan. Again, no taxes will be withheld from the transfer amount when this method is used.
  3. 60-Day Rollover: Participants may also have a distribution paid to them directly, and the IRS allows 60 days for participants to roll these funds into another IRA or retirement plan without taxation or penalty. When this method of rollover is used, taxes will be withheld from the distribution.


Restrictions on Rollovers

The IRS has several restrictions on rollovers, which plan participants must accommodate. A recent law restricts IRA rollovers to one per participant per year. Additionally, participants are not allowed to rollover funds from the IRA into which the distribution was rolled for a year following the rollover. This restriction stands regardless of how many IRAs the participant owns, but the one-per-year limit does not apply for

  • IRA conversions
  • Trustee-to-trustee transfers between IRAs
  • IRA-to-plan rollovers
  • Retirement plan rollovers


Whether or not you or your employees are rolling over investments this year, you might need some assistance with your retirement plan administration. The professionals at Heartland Consulting Group can help. We work with companies of all sizes to maximize retirement benefits while minimizing the cost to your company and the time you have to spend managing these benefits. Call us today to learn more.

For Further Reading:,-Employee/Rollovers-of-Retirement-Plan-and-IRA-Distributions

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