401(k) rollover

[juliea]

What is the name of your state? CA

Our company in California was bought by another company located in Ohio. I quit just the end 2005. I would like to request a 401(k) rollover form from HR. How long could they legally make me wait to get the process done?

 

[seniorjudge]

What is the name of your state? CA

Our company in California was bought by another company located in Ohio. I quit just the end 2005. I would like to request a 401(k) rollover form from HR. How long could they legally make me wait to get the process done?

I believe it's sixty days; but call your local IRS office and doublecheck.

I changed jobs and my old employer sent me a check for my 401(k) money withholding 20% for Federal Income Tax. I rolled over the distribution to my 401(k) plan at my current employer within 60 days. Since money was withheld from the 401(k) distribution, do I have to include that money as income?

If the amount rolled over was the net amount, that is, the amount of the distribution less the tax withheld, then the 20% withholding amount not rolled over is included in gross taxable income and may be subject to a 10 percent additional tax on early distributions from qualified retirement plans. Use Form 5329 (PDF), Additional Taxes on Other Qualified Plans (including IRA's), and Other Tax-Favored Accounts, to report the penalty.

If the amount rolled over was the gross amount, that is, you added an amount equal to the withholding to the amount that was rolled over, you would not add any of that amount to gross taxable income this year or owe a 10 percent additional tax on early distributions from qualified retirement plans.

http://www.irs.gov/faqs/faq-kw7.html

 

[tonymarq1]

What is the name of your state? CA

Our company in California was bought by another company located in Ohio. I quit just the end 2005. I would like to request a 401(k) rollover form from HR. How long could they legally make me wait to get the process done?

There are two ways to rollover the funds. You can have a broker do it, or you can ask the company to send you a check, which you will be responsible to deposit in 60 days.

Now, if you are working in a new company, and they have a 401(k) program that you're a memebr to, then you may be able to roll it over into the new plan. The only thing that may be required is liquidating the assets into cash. This will allow the purchase of the new company's assets.

If you don't have another job, then you can open an IRA with any brokerage firm. You can have them rollover the money for you.

In all cases you have 60 days to deposit the cash in the new account. No taxes or penalries are incurred if done within the 60 days.

Finally, most companies will take between 7 to 10 business days to complete the transfer. If they take longer, then you will need to escalte the issue. It's your money.

 

[efflandt]

Note that it is best to make a direct trustee to trustee transfer to a rollover IRA or other 401k, so there is no withholding.

If you have a check made out to you, there is manditory 20% withholding. You have 60 days to roll that over, plus the missing 20% to avoid tax or penalty. You would get credit for the 20% withheld at tax time. But if you cannot come up with the missing 20% for the 60 day rollover, that 20% would be taxed (and 10% penalty if it applies).

I don't know how long they have to distribute the money to you from the old 401k plan. But when our company changed trustees, the old trustee held it in a money market account for a full year before we could do anything with it. With our current plan, if we leave the company, we have a limited time to determine what to do with it, or they will send us a check (likely short the 20% withholding). So it would be in your best interests to contact the administrator of your old 401k plan to see if there is a time limit for you to make a decision and arrangements for a trustee to trustee transfer. Definitely make sure that they have your current address.

 

[cbg]

How long could they legally make me wait to get the process done?

It depends on what the plan document says. It could be anything from immediately to one year.

 

[boro45]

Rollover advice

Julia,

It really shouldn't take long to have your 401(k) rolled over. In my opinion, you would be well served to contact a company that deals with this sort of thing all the time like Fidelity or Schwab. By doing so, you'll have someone on your side incentivized to get after the old employer and have the funds rolled over as they'll be eager to have the funds under their management.