Once you've left an employer, your 401(k) balance is eligible to roll over to an IRA or another qualified plan. The process is straightforward, but the mechanics vary depending on how your previous plan administrator handles distributions. In almost every case, a direct rollover is the right approach.
A direct rollover means funds are issued payable to your new IRA at IRA Resources, not to you personally, and no taxes are withheld. The money moves from your old plan to your new IRA without a tax event or a deadline to manage.
An indirect rollover means the funds are distributed to you first. Your former plan is required to withhold 20% for federal taxes, and you have 60 days to deposit the full original amount, including the withheld portion out of pocket, into your new IRA. Miss the deadline or come up short, and the shortfall is treated as a taxable distribution with a potential 10% early withdrawal penalty on top. You're also limited to one indirect rollover per 12-month period.
Unless a direct rollover is genuinely not available to you, use the direct rollover. The additional complexity of an indirect rollover is almost never worth it.
Contact your former plan administrator and request a direct rollover to your IRA at IRA Resources. You'll need to provide them with information about your receiving account including the IRA Resources account number and delivery instructions. A few things to know:
If you receive a check: Do not endorse it. Forward it directly to IRA Resources along with a completed Rollover form.
If your administrator wires funds directly to IRA Resources: You are still required to complete an IRA Resources Rollover form. An online option is available for this.
If time is a factor, ask your administrator whether checks can be sent by expedited shipping. Many will accommodate this request.
Most rollovers complete within 2 to 4 weeks from the time you initiate the request. Processing time at your former plan, mailing time for the check, and processing time at IRA Resources all factor in. Some plans take longer. Processing times vary by administrator, and some plans have internal policies that limit the timing or frequency of distributions.
Don't initiate the rollover and wait passively. If you haven't received confirmation that funds have arrived at IRA Resources within the timeframe you were given, follow up directly with your former plan administrator. Rollovers occasionally stall due to missing paperwork or processing backlogs, and a prompt follow-up is usually all it takes to get things moving again.
What information does my former plan administrator need to process the rollover?
They will typically need your IRA Resources account number and delivery instructions, including the payee name for the check and the mailing address. Refer to the IRA Resources Rollover form or contact them to confirm the correct delivery details before you submit your rollover request.
What if my former plan won't issue a direct rollover?
While rare, some older or smaller plans may only issue distributions directly to the participant. In that case, an indirect rollover is your only option. You'll have 60 days from the date you receive the funds to deposit the full amount, including the 20% withheld for taxes, into your IRA. See What is the 60-Day Rollover Rule? for full details on the 60-day rollover rule.
Can I roll over only part of my 401(k) balance?
Sometimes. Many plan administrators require a full distribution when rolling over to an outside institution, but some permit partial rollovers. Check with your plan administrator to confirm what's available.
My plan administrator is asking for a Letter of Acceptance. What is that?
A Letter of Acceptance is a document from the receiving institution - in this case, IRA Resources - confirming that they will accept the incoming rollover funds. Contact IRA Resources directly and they will provide the letter.
Will my rollover be taxable?
A properly executed direct rollover is not a taxable event. Your former plan will issue a Form 1099-R reporting the rollover, coded to indicate it is non-taxable. You'll report it on your personal tax return as a non-taxable rollover.
This information is provided for educational purposes only and should not be interpreted as tax, legal, or investment advice. Readers are encouraged to consult a qualified professional who can offer guidance based on their personal situation.