Distribution Rules, Alternatives And Taxation - Rollovers
A rollover is a tax-free distribution of cash or other assets to a plan participant, who then contributes the assets to another retirement plan. The contribution to the second retirement plan is called a "rollover contribution."
- Rollovers to a Traditional IRA – Allowed from the following types of plans:
- Another traditional IRA
- An employer's qualified plan
- 457 plan
- 403(b) plan
- Waiver – The IRS may waive the 60-day requirement in the event of a casualty, disaster or other event beyond the taxpayer's reasonable control. An automatic waiver will be granted if failure to meet the 60-day time limit is a result of a financial institution error, and very specific requirements are met.
- Rollovers completed after 60 days – Amounts not rolled over within the 60-day limit are treated as a taxable distribution. They are taxable in the year distributed even if the 60-day period expires in the following year. A 10% early withdrawal penalty may also apply.
- One-year waiting period – An individual may only make one tax-free rollover distribution from a traditional IRA within a 12-month period. There is also a 12-month waiting period of any amount distributed into another IRA.