Lump sum pension rollover to IRA


R

Retired

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.
 
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D

D. Stussy

"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Regardless, you have 60 days from the date the money is withdrawn from the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.
 
J

JoeTaxpayer

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

Arthur Kamlet

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.
When the former custodian writes the check payable to the custodian,
it is treated as if it were a direct trustee to trustee transfer.
 
R

Retired

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.
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
 
R

Retired

=============

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.
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
 
D

D. Stussy

"Arthur Kamlet" wrote in message
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.
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.
 
J

John Levine

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.
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.
 
A

Alan

"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.
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.
 
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S

Scott V.

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.


..
 
D

D. Stussy

"John Levine" wrote in message news:m79csf$24ff$1@miucha.iecc.com...
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.
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.
 
S

Stuart A. Bronstein

D. Stussy said:
"John Levine" wrote

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.
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.
 
A

Alan

"John Levine" wrote in message news:m79csf$24ff$1@miucha.iecc.com...

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.
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.
 
D

D. Stussy

"Alan" wrote in message
"John Levine" wrote in message news:m79csf$24ff$1@miucha.iecc.com...

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.
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.
 
S

Stuart A. Bronstein

D. Stussy said:
In a direct rollover, the former trustee delivers the check to
the NEW trustee, not the IRA beneficiary.
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.
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.
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.
 
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A

Alan

"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.
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/Plan-Participant,-Employee/Rollovers-of-Retirement-Plan-and-IRA-Distributions
 

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