In Service Rollover/Trustee to Trustee Transfer
We have a client that is 59.5 and has 100% in service withdrawal options. We are looking at doing a portion of the funds from this account not all of it. Is this a “rollover” or a trustee to trustee transfer if it is paid directly to the IRA. I don’t want it to be subject to the one rollover per year rule and taxable. As an example If they were to do $250k in September and $250k in October both sent to an IRA would that be a trustee to trustee or two rollovers? Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2019-08-30 15:59
The one rollover limit only applies to IRA to same type IRA transactions. A 401k to IRA rollover is not affected by this limit, and can be done in two ways. The usual way is a direct rollover since it avoids withholding. This is a two part transaction, a distribution and a rollover and is done by direct transfer, but reported as a rollover. Somewhat confusing. The other way is to take a distribution subject to 20% mandatory withholding and do a 60 day rollover, usually having to replace the withholding from other funds. Neither of these two methods are subject to the one rollover per 12 month limit. You can do as many of these as you wish. If the client does a direct rollover of 250k in Sept and another in Oct, he will get a 1099R for 500k coded G, to be reported on Form 1040.