Rollover IRA, Penalty Questions and a long story. Hi, everyone, since I can't get a satisfied answer from either my former employer, my accountant & my friends, I think maybe some elite trader here can answer my question better. I left my company one & half year ago. And I have about $15,000 in the 401K account. 3 months ago I applied an InteractiveBrokers Direct Rollover account and would like to transfer my money from former 401K plan to this account because the HR manager (one of 3 company owners) insist that I have to open a "qualified IRA" account first. When I did open it then he told me that in order to withdraw money from my 401K plan, he must have the other 2 owners to sign the paper and he said the other 2 company owners are overseas and can't get back until one month later. I told him IB only allow 3 months to fund an account and he keeps arguing that why a broker will only allow a 3 month period to fund an account. Anyway, when the other 2 owners came back and signed the paper, another month passed by, and during that month I keeps calling to check the progress and he said it just took time. Then another 2 weeks passed by and He said the company handling 401K (which happens to be Alliance Capital) moved their office to new location and he & the agent who handle 401K plan for the company did not get informed, go figure. This is absolutely outrageous, how can a company this big moved their office and not informing their customer? Absolutely excuse! 2 days ago, my applied Rollover IRA account was closed by IB because 3 months pass by and $0 was deposited to the account. Today, I got the HR manager's call say he got the money from the 401K plan and will write me a personal check. My question is, can I accept this $15,000 personal check? Will I get penalty from IRS, even if I deposit this check within 60 days into a new applied IB Rollover IRA account? Or should I ask the company pay directly (either check or wire) to IB? And is this amount over IRA distribution limit? Thanks for any suggestion, all inputs will be appreciated.
I would think the IRA funds need to be transferred directly to your new IRA account. If you accept the personal check you may have to pay the penalty and may even have to pay tax on top of that IMO... I would get professional advice before touching that money...
We'll get the Traders Accounting guys in here to respond. That's a tricky question, for sure. We're all in Vegas, so they might not get back with you until Monday, next week. André
Your HR manager is writing you a "personal check" for your 401K rollover? Whenever I've rolled over a 401K/retirement plan the check comes form the company that handles the plan, not from the company I worked for, and certainly not in the form of a personal check! Assuming this is whole transaction legal to begin with, you would have 60 days to transfer this money to a qualified plan without paying any penalty. This is still the worst way to do this, as it is a red flag, so see if you can re-apply for your IB IRA and have them wire it directly to the account when it is approved. Totally FUBAR
I'm not sure if there is a time problem with the 1 year since you left your company before beginning this rollover but..... 1. It is cleaner (for the IRS) if you do a direct transfer (rollover) to a qualified IRA account. 2. However, I'm pretty sure in this type of rollover you have 60 days after receiving the distribution from your 401K to put that distribution into a qualified plan. 3. If you accept a check for the 401K I would suggest signing the check over directly to the new IRA instead of depositing the funds in your account first. And... 4. Get a new accountant who knows this stuff!!!!!!! He should be on top of current law regarding this because it is very common.
This is what I'm scared. My former company's HR manager thinks he know how Rollover IRA works and surely it shows he doesn't know anything! I have argued with him that this will create problem and he insisted that the 401K plan company have to pay my former company first and then my former company pay me! I have to stop him before things getting worse. Thanks, everybody!
you can legally receive the check and then put in an ira within 60 days. the problem is the company is supposed to withhold 20% for taxes and even though you only receive 80% of the money you must deposit 100% in the new ira. that means you have to come up with the difference out of pocket. if you don't you will pay tax and 10% penalty on the 20% withheld. it is far better to do a direct rollover and avoid all the paperwork and headache.
I don't want this. I don't want this, either. So this mean I ask former company pay the broker (IB) on behalf of me then I can avoid all this trouble?