|
Frequently asked questions
Q: What are the advantages of making a direct rollover?
A: In choosing a direct rollover, you authorize your employer to make your check payable directly to an IRA or another plan that is eligible to accept rollovers. Your employer can send it directly to your IRA custodian or your new employer's trustee. The check may be given to you for delivery but at no time is the check made payable to you. Using this method you avoid mandatory tax withholding and possible withdrawal penalties, and you maintain the tax-deferred status of your savings until you begin to make withdrawals.
Q: What rollover options are available to me as a beneficiary of my spouse's plan?
A: In general, the rollover options available to employees in qualified retirement plans also apply to their surviving spouses. You have the option to directly roll over the assets from a qualified plan, or you may take the cash and complete a 60-day rollover, subject to the mandatory 20% withholding rules. Rollover options are not available to a beneficiary who is not a spouse.
Q: What if I have company stock in my employer's retirement plan?
A: If your retirement plan includes company stock and your shares have appreciated, you should talk to your tax advisor before you request a distribution. Depending on your specific situation, you may be able to take advantage of important tax and estate planning opportunities that are only available at the time of distribution.
Q: What happens to my outstanding loan balance when I roll over assets from my 401(k) plan?
A: You can still complete the rollover, but you will need to make up the loan balance out of pocket. If you are not able to do this, the loan balance will be treated as a distribution from your plan, subject to income taxes and possible penalties for early withdrawal.
Q: Where can I find more information about my retirement plan distribution and direct rollovers?
A: Before your plan distribution is paid, your company will provide you with a written explanation of the special tax rules regarding your distribution options. The IRS also has information about the tax treatment of payments from qualified plans in IRS Publication 575, Pension and Annuity Income, and IRS Publication 590, Individual Retirement Arrangements. Both are available from the IRS by calling 1-800-TAX-FORM or accessing the IRS Web site at www.irs.gov.
|
