With a check made out to the new qualified account, it's not uncommon for the 401(k) plan to send the check to the participant for forwarding to the new account's trustee. Some plans provide the option to send such a check to either the participant or to the new trustee, but either way it's still a direct rollover. If it's sent to the participant, the participant just serves as a delivery carrier.
Problems can occur if in indicating the payee the 401(k) plan does not specifically identify the account that is to receive the direct rollover. It's somewhat improper, but not all that uncommon, for a 401(k) plan to make the check out to the new trustee for the benefit of the participant without specifying at least the type of account that is to receive the rollover. In that case the new trustee is not obligated to deposit the check into the correct type of account and sometimes irrecoverable errors can occur.
A direct rollover is indeed a rollover as defined in the tax code. However, the tax code only imposes the 60-day rollover deadline on indirect rollovers. An indirect rollover is one where the distribution is paid to the participant, not one that is paid directly to the receiving qualified account.
