401k distribution/rollover

L1: 401k distribution/rollover
If I took a direct distribution from my 401k, less 20% withholding,and rolledall or partinto an IRA in less than 60days, would this lock my 401k from performing any future rollovers of any kind for 1 year from date of distribution..
Thank you2006-03-28 10:20, By: car-tows, IP: [71.254.81.21]

L2: 401k distribution/rollover
If you roll over your 401(k) into an IRA, there would be no need for a 20% withholding provided the rollover was done within that time period.At that point, you would cease having a 401(k) and it would be all IRA.
If you roll ‘part’ of it over, you’d owe taxes on the remainder plus an additional 10 % penalty unless you left your employer (who sponsored the 401(k)) after you turn 55. Monies that are rolled into the IRA are subject to 10% penalties if withdrawn prior to 59 1/2, unless you take a SEPP (72(t)).
2006-03-28 10:35, By: francis3, IP: [141.154.244.227]

L2: 401k distribution/rolloverIf I understand your question, “If I took a direct distribution from my 401k, less 20% withholding” you plan to take constructive receipt of 80% of your K-plan balance with 20% going to withholding. Right? And then you plan to deposit the funds into an IRA for the second part of the rollover. If this is the case then yes, you will be locked out for one year from any more “rollovers” whereby you take constructive receipt of the funds and then deposit into another IRA. By the way, using this method you have to use other funds to replace the 20% that goes to withholding so you rollover 100% of the K-plan money. Otherwise you have a taxable event and possible 10% early withdrawal penalty for the tax withholding.
Avoid the above by using the “trustee-to-trustee” method to transfer the funds from your K-plan to your IRA. Using this method you do not have “constructive receipt” of the funds so there’s no mandatory 20% withholding and no 10% penalty. Set up the IRA then advise your K-plan custodian where to send the funds. Don’t be shocked if they tell you that the check will be mailed directly to you but it will be payable to your IRA custodian. More and more companies are using this method rather than sending the check didrectly to the IRA custodian. If you get a check don’t try to endorse it because that will only muddy the waters. Remember, you can’t endorse or “negotiate” a check that’s not made payable to you personally.
One last thought. If you retire in the year that you turn age 55 or older, then you can take distributions from the K-plan without penalty, but they will still withhold the 20% for taxes.
Hope this helps.
Jim2006-03-28 10:59, By: Jim, IP: [70.184.1.35]

L2: 401k distribution/rolloverEven though the “direct rollover” should be the transfer method of choice to avoid withholding, you could actually make several rollovers from an employer plan made payable to you and deposited into an IRA without violating the 12 month rollover limit. The only rollovers that count in this respect are rollovers FROM an IRA or rollovers FROM an IRA which received such a rollover. There is no limit for rollovers from an employer plan into an IRA or different IRAs since these did not originate with an IRA.2006-04-01 16:45, By: Alan S., IP: [24.116.165.157]

L2: 401k distribution/rolloverAlan … good catch about the 60-day rollover applying to IRA’s and not K-plans. However, my experience has been that K-plansponsorswill not allowperiodic distributions. They either want to lock your funds up with an annuity settlement which causes the participant to lose control of their money, or get out of the plan completely by transferring to an IRA Rollover account. Generally about the only acommodation allowed is a one-time distribution to the participant in conjunction with the IRA Rollover action. Another possibility is setting up a “period certain” distribution, like 5years, at the same time the IRA Rollover occurs.Plan sponsors tend toallow this to acommodate the penalty-free distributions between ages 55 and 60, and then distributions shift to the IRA Rollover account after age 59 1/2.
Jim2006-04-03 08:34, By: Jim, IP: [70.184.1.35]