Tax Tip #206
Rolling Over an Employer Retirement Plan
Rolling over a retirement plan such as a 401(k) plan from a former employer to an IRA should be a tax-free transaction. However, if not done correctly, it can not only be taxable but subject to a 10% penalty depending on age (which for IRS purposes is under 59.5 years old). This can happen when the employer issues the former employee a check for the vested funds, which then needs to be transferred into an IRA within 60 days but does not happen. Avoid the potential blunder and request a direct trustee-to-trustee transfer from the 401(k) plan to the IRA and there will be no headaches to deal with.
Contact a team member if you have more questions about a retirement plan rollover.