401k rollover

L1: 401k rolloverDoes a direct distribution from a 401k, which is rolled over within 60 days to an IRA, create any restriction to the 401k or the new IRA account under the 365 day rolloverrule? Is this provision only for rollover distributions from IRA”s to IRA”s? Note, I am aware of the 20% mandatory withholding on the 401k distribution.
Thanks, Bob2007-07-18 08:51, By: car-tows, IP: [71.173.104.55]

L2: 401k rolloverNo, the rollover from the 401k does not count against the 12 month IRA rollover limitation per IRA account.
Of course, it is still preferable to do this as a “direct rollover”, not a distribution and rollover. The 401k plan MUST offer the direct rollover per Code Section 401(a)(31). A direct rollover includes making the check payable to your IRA account for your benefit, but mailing the check to you for delivery. This will avoid the 60 day rollover issue, the withholding, and reduces time when the funds are not invested.2007-07-18 16:40, By: Alan S., IP: [24.116.66.98]

L2: 401k rolloverHere”s an additionalpoint to encourage the “trustee-to-trustee transfer method”from the K-plan to the IRA rather than having the funds distributed directly to youand thenusing the “60-day rollover” method.
Funds distributed from a K-plan are subject to the mandatory 20% withholding as a “down payment” on the tax bill for the year of distribution. However, and this is my extra point, in order to complete a 100% rollover to the IRA, you must make up the 20% that was withheld from other funds. For most people this isa really tough thing to do. You won”t see the money from that mandatory 20% withholding until you file your taxes for the year of distribution. In effect you will be making a substantially generous, interest free loan to the US Government.
Car-tows, I know you may be completely aware of this aspect, but I wanted to add this point for anyone else reading this post who may be unaware of this little “gotcha.”
Jim2007-07-19 07:27, By: Jim, IP: [24.252.195.14]

L2: 401k rolloverAlan and Jim,
Thanks for your thorough replies.
Bob2007-07-20 01:15, By: car-tows, IP: [71.173.104.55]