Rollover IRA Rules

This section of Rollover IRA website covers rollover IRA rules. Rollover IRA rules are very important to know before you make a rollover from your 401k or other retirement plans to an IRA. If you have multiple retirement plans, it is likely no longer necessary to make multiple rollovers. Below are frequently asked questions of the rollover IRA rules.

How long must a retirement plan participant wait between IRA rollovers?

There is no waiting period between direct IRA rollovers from an employer 's qualified retirement plan to an IRA. This is called a qualified rollover IRA.

A participant can make more than one direct IRA rollover of employer plan distributions within a year. The once-a-year limit on IRA to IRA rollovers does not apply to these distributions and there are no rollover IRA taxes to pay.

What distributions from qualified retirement plan are eligible for rollover into an IRA?

An eligible distribution from a participant's (or a deceased participant's spouse) employer's qualified pension, profit sharing or stock bonus plan, qualified annuity plan, or tax sheltered annuity plan (403b plan) or governmental 457 plan, can be rolled over, all or in part into a traditional IRA.

Generally, an eligible distribution is the taxable part of any distribution of all or part of the balance to a participant's credit in a qualified retirement plan except:

• A minimum required distribution.
• Hardship distributions from 401k plans and certain 403b plans, or
• Any of a series of substantially equal periodic distributions paid at least once a year over:
  • The participant's lifetime or life expectancy,
  • The lifetimes or life expectancies of the participant and a beneficiary, or
  • A period of 10 years or more.

Note: Starting in 2002 after tax contributions to qualified plans are eligible for rollover to an IRA or another qualified plan (if the other qualified plan will accept the IRA rollover and separately account for the after-tax contribution.)

Is there withholding on a direct IRA rollover?

No. In a direct IRA rollover, assets are moved from a retirement plan directly to an IRA or another retirement plan. The participant never comes into contact with the assets so there is no rollover IRA withholding.

A qualified plan must offer a participant the opportunity for a direct IRA rollover and if a participant chooses the direct IRA rollover option, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the traditional IRA. In addition, the direct IRA rollover option is not subject to the 10% additional tax on premature IRA rollover distributions.