Can I Move Retirement Plan Assets? Traditional IRA rules permit you to transfer, tax free, assets(money or property) from other retirement programs (includingtraditional IRAs) to a traditional IRA. The rules permit the followingkinds of transfers. Transfers from one trustee to another. Rollovers. Transfers incident to a divorce. This chapter discusses all three kinds of transfers. Transfers to Roth IRAs.Under certain conditions, you can move assets from a traditionalIRA to a Roth IRA. See the discussion at Can I Move Amounts Intoa Roth IRA? in chapter 2. Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trusteedirectly to another, either at your request or at the trustee'srequest, is not a rollover. Because there is nodistribution to you, the transfer is tax free. Because it is not arollover, it is not affected by the 1-year waiting period that isrequired between rollovers, discussed later under Rollover FromOne IRA Into Another. For information about direct transfers from retirement programsother than traditional IRAs, see Direct rollover option,later in this chapter. Rollovers Generally, a rollover is a tax-free distribution to you of cash orother assets from one retirement plan that you contribute to anotherretirement plan. The contribution to the second retirement plan iscalled a "rollover contribution." Note.The amount you roll over tax free is generally taxable later whenthe new plan pays that amount to you or your beneficiary. Kinds of rollovers to an IRA.There are two kinds of rollover contributions to a traditional IRA.In one, you put amounts you receive from one traditional IRA intoanother traditional IRA. In the other, you put amounts you receivefrom an employer's qualified retirement plan for its employees (seeEmployer plans under Are You Covered by an EmployerPlan?, earlier) into a traditional IRA. Treatment of rollovers.You cannot deduct a rollover contribution, but you must report therollover distribution on your tax return as discussed later underReporting rollovers from IRAs and Reporting rolloversfrom employer plans. Rollover notice.A written explanation of rollover treatment must be given to you bythe plan making the distribution. Time Limit for Makinga Rollover Contribution You must make the rollover contribution by the 60th day after theday you receive the distribution from your traditional IRA or youremployer's plan. However, see Extension of rollover period,later. Rollovers completed after the 60-day period.Amounts not rolled over within the 60-day period do not qualify fortax-free rollover treatment and you must be treat them as a taxabledistribution from either your IRA or your employer's plan. The amountnot rolled over is taxable in the year distributed, not in the yearthe 60-day period expires. You may also have to pay a 10% tax onpremature distributions as discussed later under PrematureDistributions (Early Withdrawals). Treat a contribution after the 60-day period as a regularcontribution to your IRA. Any part of the contribution that is morethan the maximum amount you could contribute may be an excesscontribution, as discussed later under Excess Contributions. Extension of rollover period.If an amount distributed to you from a traditional IRA or aqualified employer retirement plan becomes a frozen deposit in a financial institution during the 60-day period allowed for arollover, a special rule extends the rollover period. The period during which the amount is a frozen deposit is notcounted in the 60-day period, nor can the 60-day period end earlierthan 10 days after the deposit is no longer frozen. To qualify underthis rule, the deposit must be frozen on at least one day during the60-day rollover period. Frozen deposit.This is any deposit that cannot be withdrawn because ofeither of the following reasons. The financial institution is bankrupt or insolvent. The state where the institution is located restrictswithdrawals because one or more financial institutions in the stateare (or are about to be) bankrupt or insolvent. Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from onetraditional IRA if you reinvest them within 60 days in anothertraditional IRA. Because this is a rollover, you cannot deduct theamount that you reinvest in the new IRA. TaxTip: You may be able to treat a contribution made to one type of IRA ashaving been made to a different type of IRA. This is calledrecharacterizing the contribution. See Recharacterizationsin chapter 2for more information. Waiting period between rollovers.You can take (receive) a distribution from a traditional IRA andmake a rollover contribution (of all or part of the amount received)to another traditional IRA only once in any 1-year period. The 1-yearperiod begins on the date you receive the IRA distribution, not on thedate you roll it over into another IRA. This rule applies separatelyto each traditional IRA you own. Example.If you have two traditional IRAs, IRA-1 and IRA-2, andyou roll over assets of IRA-1 into a new traditional IRA(IRA-3), you may also make a rollover from IRA-2 intoIRA-3, or into any other traditional IRA, within 1 year afterthe rollover distribution from IRA-1. These are both allowablerollovers because you have not received more than one distributionfrom either IRA within 1 year. However, you cannot, within the 1-yearperiod, again roll over the assets you rolled over into IRA-3into any other traditional IRA. If any amount distributed from a traditional IRA is rolled over taxfree, later distributions from that IRA within a 1-year period willnot qualify as rollovers. They are taxable and may be subject to the10% tax on premature distributions. Exception.An exception to the 1-year waiting period rule has been granted bythe IRS for distributions made from a failed financial institution bythe Federal Deposit Insurance Corporation (FDIC) as receiver for theinstitution. To qualify for the exception, the distribution mustsatisfy both of the following requirements. It must not be initiated by either the custodialinstitution or the depositor. It must be made because: The custodial institution is insolvent, and The receiver is unable to find a buyer for theinstitution. The same property must be rolled over.You must roll over into a new traditional IRA the same property youreceived from your old traditional IRA. Partial rollovers.If you withdraw assets from a traditional IRA, you can roll overpart of the withdrawal tax free into another traditional IRA and keepthe rest of it. The amount you keep will generally be taxable (exceptfor the part that is a return of nondeductible contributions) and maybe subject to the 10% tax on premature distributions discussed laterunder Premature Distributions (Early Withdrawals). Required distributions.Amounts that must be distributed during a particular year under therequired distribution rules (discussed later) are not eligiblefor rollover treatment. Inherited IRAs.If you inherit a traditional IRA from your spouse, you generallycan roll it over into a traditional IRA established for you, or youcan choose to make it your own as discussed earlier (seeInherited IRAs under How Much Can Be Contributed?).Also, see Distributions received by a surviving spouse,later. Not inherited from spouse.If you inherited a traditional IRA from someone other than yourspouse, you cannot roll it over or allow it to receive a rollovercontribution. You must withdraw the IRA assets within a certainperiod. For more information, see Beneficiaries,underWhen Must I Withdraw IRA Assets?, later. Reporting rollovers from IRAs.Report any rollover from one traditional IRA to another traditionalIRA on lines 15a and 15b of Form 1040, or on lines 10a and 10b of Form1040A. Enter the total amount of the distribution on line 15a of Form1040, or on line 10a of Form 1040A. If the total amount on line 15a ofForm 1040, or on line 10a of Form 1040A was rolled over, enter zero online 15b of Form 1040, or on line 10b of Form 1040A. Otherwise, enterthe taxable portion of the part that was not rolled over on line 15bof Form 1040, or on line 10b of Form 1040A. See DistributionsFully or Partly Taxable under Are DistributionsTaxable?. Rollover From Employer's PlanInto an IRA If you receive an eligible rollover distribution fromyour (or your deceased spouse's) employer's qualified pension,profit-sharing or stock bonus plan, annuity plan, or tax-shelteredannuity plan (403(b) plan), you can roll over all or part of it into atraditional IRA. Top-Hotel Reservierungen LourdesA qualified plan is one that meets the requirements of the InternalRevenue Code. Eligible rollover distribution.Generally, an eligible rollover distribution is the taxable part ofany distribution of all or part of the balance to your credit in aqualified retirement plan except: A required minimum distribution, Hardship distributions from 401(k) plans and 403(b) plans,or Any of a series of substantially equal periodicdistributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and yourbeneficiary, or A period of 10 years or more. The taxable parts of most other distributions are eligiblerollover distributions. See Maximum rollover, later. Also,see Publication 575 for additional exceptions. Written explanation to recipients.The administrator of a qualified employer plan must, within areasonable period of time before making an eligible rolloverdistribution, provide you with a written explanation. It must tell youabout all of the following. Your right to have the distribution paid tax free directlyto a traditional IRA or another eligible retirement plan. The requirement to withhold tax from the distribution if itis not paid directly to a traditional IRA or another eligibleretirement plan. The nontaxability of any part of the distribution that youroll over to a traditional IRA or another eligible retirement planwithin 60 days after you receive the distribution. Other qualified employer plan rules, if they apply,including those for lump-sum distributions, alternate payees, and cashor deferred arrangements. The plan administrator must provide you with a written explanationno earlier than 90 days and no later than 30 days before thedistribution is made. However, you can choose to have a distribution made less than 30days after the explanation is provided as long as both ofthe following requirements are met. You are given at least 30 days after the notice is providedto consider whether you want to elect a direct rollover. You are given information that clearly states that you havethis 30-day to make the decision. Contact the plan administrator if you have any questionsregarding this information. Withholding requirement.If an eligible rollover distribution is paid directly to you, thepayer must withhold 20% of it. This applies even if you plan to rollover the distribution to a traditional IRA (or another qualified planas discussed in Publication 575). However, you can avoid withholdingby choosing the direct rollover option, discussed later. Exceptions.Withholding from an eligible rollover distribution paid to you isnot required if either of the following conditions apply. The distribution and all previous eligible rolloverdistributions you received during your tax year from the same plan(or, at the payer's option, from all your employer's plans) total lessthan $200. The distribution consists solely of employer securities,plus cash of $200 or less in lieu of fractional shares. Other withholding rules.If you receive a distribution that is not an eligible rolloverdistribution, the 20% withholding requirement does not apply. However,other withholding rules apply to these distributions. The rules thatapply depend on whether the distribution is a periodic distribution ora nonperiodic distribution that is not an eligible rolloverdistribution. For either of these distributions, you can still choosenot to have tax withheld. For more information, get Publication 575. Direct rollover option.Your employer's qualified plan must give you the option to have anypart of an eligible rollover distribution paid directly to atraditional IRA (or to an eligible retirement plan as discussed inPublication 575). Under this option, all or part of the distributioncan be paid directly to a traditional IRA (or another eligibleretirement plan that accepts rollovers). The plan is not required togive you this option if your eligible rollover distributions areexpected to total less than $200 for the year. Withholding.If you choose the direct rollover option, no tax is withheld fromany part of the designated distribution that is directly paid to thetrustee of the traditional IRA (or other plan). If any part is paid to you, the payer must withhold 20% of thatpart's taxable amount. Since most distributions are fully taxable,payers will generally withhold 20% of the entire amount designated fordistribution to you. Choosing the right option.You generally can leave all or part of the distribution in theplan. If you do not leave the distribution in your employer's plan,the following comparison chart may help you decide which distributionoption to choose. Carefully compare the following tax effects of eachoption. Comparison Chart Direct Rollover Payment to You No withholding. Payer must withhold income tax of20% on the taxable part (even if youroll it over to a traditional IRA orother plan). No 10% additional tax.(See PrematureDistributions, later.) If you are under age 59 1/2, a 10%additional tax may apply to the taxablepart (including an amount equal to thetax withheld) that is not rolled over. Not income until laterdistributed to you fromthe IRA or other plan. Any taxable part (including an amountequal to the tax withheld) not rolled overis income. TaxTip: If you decide to roll over tax free any part of a distribution, thedirect rollover option will generally be to your advantage. This isbecause you will not have 20% withholding or be subject to the 10%additional tax under that option. If you have a lump-sum distribution and do not plan to roll overany part of it, the distribution may be eligible for special taxtreatment that could lower your tax for the distribution year. In thatcase, you may want to see Publication 575 and Form 4972, Tax onLump-Sum Distributions, and its instructions to determinewhether your distribution qualifies for special tax treatment and, ifso, to figure your tax under the special methods. You can then compare any advantages from using Form 4972 to figureyour tax on the lump-sum distribution with any advantages from rollingover tax free all or part of the distribution. If you roll over anypart of the lump-sum distribution, however, you cannot use the Form4972 special tax treatment for any part of the distribution. Maximum rollover.The most you can roll over is the taxable part of any eligiblerollover distribution (defined earlier) from your employer's qualifiedplan. The distribution you receive generally will be all taxableunless you have made nondeductible employee contributions to the plan. Contributions you made to your employer's plan.You cannot roll over a distribution of contributions you made toyour employer's plan, except voluntary deductible employeecontributions (DECs, defined below. If you roll over yourcontributions (other than DECs), you must treat them as regular (notrollover) contributions and you may have to pay an excesscontributions tax (discussed later) on all or part of them. DECs.These are voluntary deductible employee contributions. Prior toJanuary 1, 1987, employees could make and deduct these contributionsto certain qualified employers' plans and government plans. These arenot the same as an employee's elective contributions to a 401(k) plan,which are not deductible by the employee. If you receive a distribution from your employer's qualified planof any part of the balance of your DECs and the earnings from them,you can roll over any part of the distribution. No waiting period between rollovers.You can make more than one rollover of employer plan distributionswithin a year. The once-a-year limit on IRA-to-IRA rollovers does notapply to these distributions. IRA as a holding account (conduit IRA) for rollovers to othereligible plans.An IRA qualifies as a conduit IRA if it is a traditional IRA thatserves as a holding account or conduit for assets received from aneligible distribution from your first employer's plan. The conduit IRAmust be made up of only those assets and gains and earnings on thoseassets. A conduit IRA will no longer qualify if you mix regularcontributions or funds from other sources with the rolloverdistribution from your employer's plan. If you receive an eligible rollover distribution from youremployer's plan and roll over part or all of it into one or moreconduit IRAs, you can later roll over those assets into a newemployer's plan. Property and cash received in a distribution.If you receive property and cash in an eligible rolloverdistribution from your employer's plan, you can roll over either theproperty or the cash, or any combination of the two that you choose. Treatment if the same property is not rolled over.Your contribution to a traditional IRA of cash representing thefair market value of property received in a distribution from aqualified retirement plan does not qualify as a rollover if you keepthe property. You must either roll over the property or sell it androll over the proceeds, as explained next. Sale of property received in a distribution from a qualifiedplan.Instead of rolling over a distribution of property other than cashfrom a qualified employer retirement plan, you can sell all or part ofthe property and roll over the amount you receive into a traditionalIRA. You cannot substitute your own funds for property you receivefrom your employer's retirement plan. Example.hotel rooms BilbaoYou receive a total distribution from your employer's planconsisting of $10,000 cash and $15,000 worth of property. You decidedto keep the property. You can roll over to a traditional IRA the$10,000 cash received, but you cannot roll over an additional $15,000representing the value of the property you choose not to sell. Treatment of gain or loss.If you sell the distributed property and roll over all the proceedsinto a traditional IRA, no gain or loss is recognized. The saleproceeds (including any increase in value) are treated as part of thedistribution and are not included in your gross income. Example.On September 2, Mike received a lump-sum distribution from hisemployer's retirement plan of $50,000 in cash and $50,000 in stock.The stock was not stock of his employer. On September 24, he sold thestock for $60,000. On October 4, he rolled over $110,000 in cash($50,000 from the original distribution and $60,000 from the sale ofstock). Mike does not include the $10,000 gain from the sale of stockas part of his income because he rolled over the entire amount into atraditional IRA. Note.Special rules may apply to distributions of employer securities.For more information, get Publication 575. Some sales proceeds rolled over.If you roll over part of the amount received from the sale ofproperty, see Publication 575. Life insurance contract.You cannot roll over a life insurance contract from a qualifiedplan into a traditional IRA. Distributions received by a surviving spouse.If a distribution from an employer's qualified plan or atax-sheltered annuity is paid to the surviving spouse of a deceasedemployee, that spouse can roll over into a traditional IRA part or allof any eligible rollover distribution (defined earlier). The survivingspouse can also roll over all or any part of a distribution ofdeductible employee contributions (DECs). No rollover into another employer qualified plan.A surviving spouse cannot roll over a distribution described in thepreceding paragraph into another qualified employer plan or annuity. Distributions under divorce or similar proceedings (alternatepayees).If you are the spouse or former spouse of an employee and youreceive a distribution from a qualified employer plan as a result ofdivorce or similar proceedings, you may be able to roll over all orpart of it into a traditional IRA. To qualify, the distribution mustbe: One that would have been an eligible rollover distribution(defined earlier) if it had been made to the employee, and Made under a qualified domestic relations order. Qualified domestic relations order.A domestic relations order is a judgment, decree, or order(including approval of a property settlement agreement) that is issuedunder the domestic relations law of a state. A "qualified domesticrelations order" gives to an alternate payee (a spouse, formerspouse, child, or dependent of a participant in a retirement plan) theright to receive all or part of the benefits that would be payable toa participant under the plan. The order requires certain specificinformation, and it cannot alter the amount or form of the benefits ofthe plan. Tax treatment if all of an eligible distribution is notrolled over.Any part of an eligible rollover distribution that you keep istaxable in the year you receive it. If you roll over none of it,special rules for lump-sum distributions may apply. See Publication 575. The 10% additional tax on premature distributions, discussedlater under What Acts Result in Penalties?, does not apply. Keogh plans and rollovers.If you are self-employed, you are generally treated as an employeefor rollover purposes. Consequently, if you receive an eligiblerollover distribution from a Keogh plan, you can roll over all or partof the distribution (including a lump-sum distribution) into atraditional IRA (or another eligible retirement plan as discussed inPublication 575). For information on lump-sum distributions, seePublication 575. More information.For more information about Keogh plans, get Publication 560. Distribution from a tax-sheltered annuity.If you receive an eligible rollover distribution from atax-sheltered annuity plan, you can roll it over into a traditionalIRA. You cannot roll it over into another eligible retirement planunless that plan is a tax-sheltered annuity plan. Receipt of property other than money.If you receive property other than money, you can sell the propertyand roll over the proceeds as discussed earlier. Conduit IRA.If your traditional IRA contains only assets (including earningsand gains) that were rolled over from a tax-sheltered annuity, you canroll over these assets into another tax-sheltered annuity. If you plananother rollover into another tax-sheltered annuity, do not combinethe assets in your IRA from the rollover with assets from anothersource. Do not roll over an amount from a tax-shelteredannuity into a qualified pension plan. More information.For more information about tax-sheltered annuities, get Publication 571. Rollover from bond purchase plan.If you redeem retirement bonds that were distributed to you under aqualified bond purchase plan, you can roll over tax free part of theamount you receive from the redemption into a traditional IRA. You can redeem these bonds even if you are under age 59 1/2. In addition, you can roll over the proceeds, tax free, into aqualified employer plan. However, when you receive a distribution at alater time, it will not be eligible for special 5- or 10-yearaveraging or 20% capital gain treatment. Reporting rollovers from employer plans.To report a rollover from an employer retirement plan to atraditional IRA, use lines 16a and 16b, Form 1040, or lines 11a and11b, Form 1040A. Do not use lines 15a or 15b, Form 1040, or lines 10aor 10b, Form 1040A. Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouseor former spouse to you by a divorce or separate maintenance decree ora written document related to such a decree, the interest in the IRA,starting from the date of the transfer, is treated as your IRA.The transfer is tax free. For information about transfer ofinterests in employer plans, see Distributions under divorce orsimilar proceedings (alternate payees), under Rollovers,earlier. Transfer methods.If you are required to transfer some or all of the assets in atraditional IRA to your spouse or former spouse, there are twocommonly used methods that you can use to make the transfer. Themethods are: Changing the name on the IRA, and Making a direct transfer of IRA assets. Changing the name on the IRA.If all the assets in a traditional IRA are to be transferred, youcan make the transfer by changing the name on the IRA from your nameto the name of your spouse or former spouse. Direct transfer.Under this method, you direct the trustee of the traditional IRA totransfer the affected assets directly to the trustee of a new orexisting traditional IRA set up in the name of your spouse or formerspouse. If your spouse or former spouse is allowed to keep his or herportion of the IRA assets in your existing IRA, you can direct thetrustee to transfer the assets you are permitted to keep directly to anew or existing traditional IRA set up in your name. The name on theIRA containing your spouse's or former spouse's portion of the assetswould then be changed to show his or her ownership.