My spouse recently received an automatic pension distribution from her previous employer (the pension is new for this year so the payout was modest). According to the plan administrator, she's eligible to utilize the IRS's 60 Day Rollover Rule for this distribution and deposit it into an IRA or a existing retirement plan.
Since taxes were withheld on the pension payout, I assume she can deposit the full taxable amount into her existing 401k? Does she simply deposit the check into her bank account and then transfer the full taxable amount from her bank account to the 401k? How is this transfer reported on her taxes when we file (MFJ)?
Yes, if she was cashed out for (let's say) $5000, but the check was for $4000, she can roll over the entire $5000 to the new plan if she can make up the difference from other money. She will get a 1099-R showing a withdrawal, Turbotax will ask what she did with the money and one of the choices is "I rolled it all over into another qualified plan." She won't owe tax, but gets credit for the withholding, and it will come back as part of her refund.
As far as depositing the check, as long as it is made out to her, that's fine. Sometimes the check would be made out to "Fidelity on behalf of Jane Smith" or some such, that would mean it goes straight to the custodian and you would have to send a separate check or electronic deposit in the amount of the remaining withholding. And you want to make sure the new 401k plan will accept incoming rollover funds, some plans don't. If the new employer plan won't accept the incoming funds she can roll them over into an IRA that she can establish at any bank or broker that offers them.
Yes you can (and should) send the full amount to the other account. Then if you roll it into an another account. It will not be taxable and you will get credit for the withholding. You will get a 1099R for it. After you enter the 1099R it will ask what you did with it. But I’m not sure you can roll over a pension. Or is it from a 401K account? @dmertz
Thanks. This is described as a pension-like retirement plan (it's a Retirement Benefit Account), which is why I asked the plan administrator. It was unclear how these RBA plans were handled, but the benefits specialists tells me it qualifies for the 60-day rollover rule.
My wife is between jobs at the moment so I'm wondering if it can still be rolled into her old employer's 401k?
You would have to ask the old 401K plan if you can. You might be able to put it in a IRA account instead.
Yes, if she was cashed out for (let's say) $5000, but the check was for $4000, she can roll over the entire $5000 to the new plan if she can make up the difference from other money. She will get a 1099-R showing a withdrawal, Turbotax will ask what she did with the money and one of the choices is "I rolled it all over into another qualified plan." She won't owe tax, but gets credit for the withholding, and it will come back as part of her refund.
As far as depositing the check, as long as it is made out to her, that's fine. Sometimes the check would be made out to "Fidelity on behalf of Jane Smith" or some such, that would mean it goes straight to the custodian and you would have to send a separate check or electronic deposit in the amount of the remaining withholding. And you want to make sure the new 401k plan will accept incoming rollover funds, some plans don't. If the new employer plan won't accept the incoming funds she can roll them over into an IRA that she can establish at any bank or broker that offers them.
Thank you. This makes sense. To be clear, a rollover doesn't have to occur directly from the RBA to the 401k (i.e., in-kind) but can touch my spouse's bank account before being transferred to the 401k (so long as it meets the 60-day Rollover Rule and the 401k accepts the rollover)?
@Michael16 wrote:
Thank you. This makes sense. To be clear, a rollover doesn't have to occur directly from the RBA to the 401k (i.e., in-kind) but can touch my spouse's bank account before being transferred to the 401k (so long as it meets the 60-day Rollover Rule and the 401k accepts the rollover)?
Yes.