Lump sum pension rollover to IRA

Discussion in 'Tax' started by Retired, Dec 17, 2014.

  1. Retired

    Retired Guest

    My ex-employer (Motorola) sold its d/b pension plan to Prudential. I
    am eligible for and am to receive a lump sum payout, which is to be
    rolled over to previous existing Rollover IRA @ Fidelity. We had been
    told the payout would be effective Dec 19.

    I had planned on getting the check sometime next week, and taking it
    to local Fidelity office for deposit etc. (Check is being sent to me
    with Fidelity's name and FBO info etc)

    I just checked my on-line account @ Motorola ( actually AON Hewitt),
    and it says "effective payout date" is now Dec 17, but "Payments are
    mailed on the 1st of month".

    If in fact the check is dated in, and deposited in, Jan 2015, does
    this distribution & rollover get reported for Tax Year 2015, instead
    of 2014 ? I assume yes.

    What if check is dated Dec 2014, but comes to late to get to Fidelity
    until early Jan 2015 ? Can the "60 days" overlap the end of the year OK ?
    And it is then reported for TY 2015.

    Thanks for any help.
     
    Retired, Dec 17, 2014
    #1
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  2. Retired

    D. Stussy Guest

    "Retired" wrote in message
    My ex-employer (Motorola) sold its d/b pension plan to Prudential. I
    am eligible for and am to receive a lump sum payout, which is to be
    rolled over to previous existing Rollover IRA @ Fidelity. We had been
    told the payout would be effective Dec 19.

    I had planned on getting the check sometime next week, and taking it
    to local Fidelity office for deposit etc. (Check is being sent to me
    with Fidelity's name and FBO info etc)

    I just checked my on-line account @ Motorola ( actually AON Hewitt),
    and it says "effective payout date" is now Dec 17, but "Payments are
    mailed on the 1st of month".

    If in fact the check is dated in, and deposited in, Jan 2015, does
    this distribution & rollover get reported for Tax Year 2015, instead
    of 2014 ? I assume yes.

    What if check is dated Dec 2014, but comes to late to get to Fidelity
    until early Jan 2015 ? Can the "60 days" overlap the end of the year OK ?
    And it is then reported for TY 2015.

    Thanks for any help.
    =============

    Why didn't you do a trustee-to-trustee transfer?

    Regardless, you have 60 days from the date the money is withdrawn from the
    account to complete the rollover. Year end overlap is fine.

    For purposes of the 1099-R, if they don't mail the check until January 2015,
    then you should receive NO form for 2014. To be reportable, it has to be
    made available to you.
     
    D. Stussy, Dec 19, 2014
    #2
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  3. Retired

    JoeTaxpayer Guest

    I worked for a company spun off by Motorola as well. When they first
    went portable pension option (2004?) I took portable and, as I recall,
    they mailed me the check, payable to Charles Schwab, but it came to me
    to drive over to deposit it. Trustee-to-trustee wasn't an option.
     
    JoeTaxpayer, Dec 21, 2014
    #3
  4. When the former custodian writes the check payable to the custodian,
    it is treated as if it were a direct trustee to trustee transfer.
     
    Arthur Kamlet, Dec 21, 2014
    #4
  5. Retired

    Retired Guest

    Same here.
    Moto/AON Hewitt would only send check direct to me, but addressed as
    Fidelity, FBO my name, acct# etc.

    Have since studied Pub 590 in more detail, and appears I'll be OK as
    along as check was cut and mailed on 19th.

    Thanks for response
     
    Retired, Dec 21, 2014
    #5
  6. Retired

    Retired Guest

    Was on 3 way call with Fidelity and AON Hewitt, and they would not
    send check direct to Fidelity, even though the packet of info they
    sent out indicate the would/could.

    Oh well.......

    Thanks
     
    Retired, Dec 21, 2014
    #6
  7. Retired

    D. Stussy Guest

    "Arthur Kamlet" wrote in message
    When the former custodian writes the check payable to the custodian,
    it is treated as if it were a direct trustee to trustee transfer.
    =============

    I see the logic in your conclusion, but have to disagree with that. A
    direct trustee-to-trustee transfer never passes through the taxpayer's
    hands. Here, the check was received by the individual and passed through
    his hands, even though it were paid to the order of the new trustee.
     
    D. Stussy, Dec 22, 2014
    #7
  8. Retired

    John Levine Guest

    I see the logic in your conclusion, but have to disagree with that. A
    This seems like hair-splitting to me. Yes, the taxpayer had the
    physical check, but it wasn't made out to him, and he couldn't cash
    it. By this logic, if the first trustee had mailed the check to the
    second, that's not a direct transfer either, since it passed through
    the hands of the postman.
     
    John Levine, Dec 22, 2014
    #8
  9. Retired

    Alan Guest

    It is not a trustee-to-trustee transfer. It is called a direct rollover
    and there is no 60 day requirement. Direct rollovers are very typical
    when going from a qualified plan to an IRA. It is a tax-free transfer
    of retirement assets. You are allowed more than one direct rollover each
    year.... just like trustee-to-trustee transfers.
     
    Alan, Dec 22, 2014
    #9
  10. Retired

    Scott V. Guest

    responding to
    http://www.beansmart.com/taxes/lump-sum-pension-rollover-to-ira-42109-.htm ,
    Scott V. wrote:
    Got my check today and even though I asked them to send the check to Scottrade
    and gave them the
    account info, they sent the check to me. That wouldn't be bad except them
    made the check out to
    me and withheld 20%!!

    Saying I am a little angry is an HUGE understatement. The real question is
    can they fix this by
    the end of the year so we don't have this amount added to our 2014 income. I
    wouldn't want to
    be a person taking phone calls tomorrow from x Motorola employees who got
    their pension checks
    today.


    ..
     
    Scott V., Dec 23, 2014
    #10
  11. Retired

    D. Stussy Guest

    "John Levine" wrote in message news:m79csf$24ff$...
    This seems like hair-splitting to me. Yes, the taxpayer had the
    physical check, but it wasn't made out to him, and he couldn't cash
    it. By this logic, if the first trustee had mailed the check to the
    second, that's not a direct transfer either, since it passed through
    the hands of the postman.
    ===========

    The statutory language of IRC Section 408 makes it clear: If the taxpayer
    touches the funds, even if it's to hand the check to a successor trustee,
    it's not a direct transfer.
     
    D. Stussy, Dec 25, 2014
    #11
  12. Exactly what language in section 408 says that? I don't see
    anything in that statute talking about direct transfers. But the
    definition of rollover starts out say saying in applies to an

    "amount paid or distributed out of an individual retirement account
    or individual retirement annuity to the individual for whose
    benefit the account or annuity is maintained"

    If a check made out by one trustee to another is delivered to the
    taxpayer, it is not "paid or distributed" to him.
     
    Stuart A. Bronstein, Dec 25, 2014
    #12
  13. Retired

    Alan Guest

    Per my first reply..... It is a direct rollover and there is no 60 day
    requirement. Direct rollovers are treated the same as
    trustee-to-trustee transfers. Direct rollovers are typical of qualified
    plan to IRA rollovers. The plan administrator cuts the check made out to
    the IRA and delivers the check to the IRA owner. This is not the same as
    distributing the funds to the owner by making the check out to the
    individual owner.
     
    Alan, Dec 25, 2014
    #13
  14. Retired

    D. Stussy Guest

    "Alan" wrote in message
    Per my first reply..... It is a direct rollover and there is no 60 day
    requirement. Direct rollovers are treated the same as
    trustee-to-trustee transfers. Direct rollovers are typical of qualified
    plan to IRA rollovers. The plan administrator cuts the check made out to
    the IRA and delivers the check to the IRA owner. This is not the same as
    distributing the funds to the owner by making the check out to the
    individual owner.
    ==========
    In a direct rollover, the former trustee delivers the check to the NEW
    trustee, not the IRA beneficiary.

    See where it says "received by an individual" in section 408(d)(3)(B), and
    similarly 408(d)(3)(A)(i)? That does not require that the check be
    negotiable by the individual.
     
    D. Stussy, Dec 25, 2014
    #14
  15. Generally the trustee will deliver the check to someone who
    delivers the check to someone who delivers the check to the new
    trustee. I don't see why the beneficiary can't be one of those
    intermediaries.
    The funds can't be received by the individual if he can't negotiate
    the check. He receives the check, sure. But not the funds.

    In the two places in the statute that use the phrase you quote,
    left something out. It refers to "any amount received by an
    individual...." Someone can't receive an "amount" of money if all
    he has is bare custody of a check he can't cash.

    Also, those two references in the statute only deal with what is or
    is not a rollover. As far as what is taxable if the rules aren't
    met, the statue says that only applies to an "amount paid or
    distributed out of an individual retirement plan...." Handing
    someone a check he can't negotiate is not a payment or a
    distribution.
     
    Stuart A. Bronstein, Dec 26, 2014
    #15
  16. Retired

    Alan Guest

    408(d)(3) is irrelevant. It deals with distributions from an IRA. We are
    discussing rollovers from a qualified plan to an IRA. You have the wrong
    section of the code. The rules are in either the regs or a notice
    relating to section 402.

    The IRS website also explains the difference between the 60 day rollover
    and a direct rollover. The 60 day rollover is a distribution from the
    plan in the form of a check made out to you and it is subject to
    mandatory 20% withholding. A direct rollover is in the form of a check
    made out to then plan and is not subject to withholding.

    http://www.irs.gov/Retirement-Plans...vers-of-Retirement-Plan-and-IRA-Distributions
     
    Alan, Dec 26, 2014
    #16
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