taking advantage of indirect rollver from 401K 60 days window

[rvle]

hello everyone,

My original 401K institution is making a check payable to my new institution with my name on it as FBO with 100% of the money (no tax withheld). So my question is, can I cash the check into my personal account and deposit the money later into the new institution within the allowed 60 days window? Appreciate any input!

[rjs]

Your bank probably will not accept the check because it's not payable to you. It's payable to the new institution. "FBO" identifies you as the owner of the 401(k), not as a payee. This is a direct trustee-to-trustee transfer, not an indirect rollover. The paper passes through your hands, but the money doesn't pass through your hands. All you can do with the check is send it to the new institution. You're just a messenger.

[rvle]

thanks for the quick reply. But what if I have a bank that is willing to cash the check that is FBO'd to me?

[dmertz · Accepted solution]

"can I cash the check into my personal account and deposit the money later into the new institution within the allowed 60 days window?"

Technically, no.  The fact that no taxes are being withheld implies a direct rollover and the check should actually be made out to the receiving account, not just to the financial institution FBO you.  Still, 401(k) plans often make the payee ambiguous such that it is possible to deposit the funds into any of your accounts at that financial institution, and depositing the funds into a nonqualified account does cause the distribution to fail to be a direct rollover despite no taxes being withheld.  Since the distribution fails to be a direct rollover, completion of the rollover would have to be accomplished indirectly by the 60th day following the date of the distribution.  You certainly can't deposit the funds into any account at a different financial institution because  neither you nor that different financial institution is the payee on the check.

[rvle]

Appreciate the thorough explanation.