Rollovers (401k & 403b)

If you withdraw cash or other assets from an employer-sponsored retirement plan (“employer plan”) in an “eligible rollover distribution,” (defined below) you can defer paying tax on the distribution by rolling all or part of it over to another employer plan or to a traditional IRA. You don’t include the amount rolled over in your income until you receive it in a distribution from the recipient plan or IRA.

You can also roll all or part of your distribution to a Roth IRA. You’ll pay income tax on the taxable portion of your distribution at the time of the rollover, but qualified distributions from the Roth IRA are free from federal income taxes.

Caution: Special rules apply to distributions from designated Roth 401(k), Roth403(b), and Roth 457(b) accounts. See “Roth Accounts and Roth IRAs” below.
Rollovers from employer plans generally take one of four forms:

  1. A transfer from your employer plan directly to an IRA trustee/custodian (this is a type of direct rollover)
  2. A transfer from your employer plan to you, and then, within 60 days, from you to an IRA trustee/custodian (this is a type of indirect rollover)
  3. A transfer from your employer plan directly to the trustee of the retirement plan at a new employer (this is a type of direct rollover)
  4. A transfer from your employer plan to you, and then from you to the trustee of a retirement plan at a new employer (this is a type of indirect rollover)

Tip: Eligible rollover distributions are typically paid from defined contribution plans. A defined contribution plan is a retirement plan in which contributions are based on a set formula (e.g., a percentage of the employee’s pretax compensation), while the payout is based on total contributions and investment performance. The 401(k) plan is the most common type of defined contribution plan. However, you may also roll over a distribution you receive from a defined benefit plan if the distribution qualifies as an eligible rollover distribution.

Caution: If you were born before 1936, and you receive a lump sum distribution from your employer plan, your distribution may be eligible for special tax treatment which may be lost if you roll all or part of your distribution over to an IRA. Consult a tax professional.

Caution: Special rules may apply to employer plan distributions received by qualified individuals who are affected by certain presidentially-declared natural disasters, and repayment of qualified reservist distributions.

For more information on our Rollovers contact one of our Regent Financial Services representatives.

Regent Financial Services are available at 1540 South Federal Highway, Pompano Beach, FL 33062 or by appointment at a time and place of your convenience. Investments and insurance products and services are offered through Infinex Investments, Inc., Member FINRA/SIPC. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk including the possible loss of value.