Old Employer’s 401(k) won’t do direct rollovers

[lostinlove]

@ilovejeshua Oh….. so if you contributed to a traditional Ira X years ago, backdoor is not an option? (assuming your employer otherwise allows it)

 

[ilovejeshua]

@lostinlove

so if you contributed to a traditional Ira X years ago

And still have a tIRA balance today/when you want to exercise the backdoor option. (If you contributed to a tIRA 20 years ago with your high school job income and then converted it to a Roth during college when you were unemployed and have $0 tIRA today, you're fine.)

assuming your employer otherwise allows it

Your employer has nothing to do with this process, these are all your individual accounts.

 

[freebornjim]

@lostinlove That's not necessarily true. Many 401(k) plans allow you to move tIRA balances into the 401(k). All you have to do is at some point roll those funds out of the IRA and leave the account empty.

You're only subject to the pro-rata rule for any funds in the account at the time of Roth conversion, not those that have been there in the past.

Also, backdoor Roth has nothing to do with your employer as it's all post-tax dollars moving around in personal accounts (tIRA, rIRA).

 

[rachellee]

@ilovejeshua My income is below the cut off to contribute to R.IRA so I believe this is not relevant to my case

 

[pmattson]

@rachellee It is below the limit today. hopefully in the far future it will be a problem for you.

 

[wenwen86]

@rachellee No company wants to relinquish custodianship of money. Go to your current provider with a statement from Empower and ask them to pull it into their institution. When I did that it was 3 minutes of dude typing information from the statement and a finger signature on an iPad. About 2 weeks later the assets from the old custodian showed up no problem.

 

[vannitheng]

@rachellee Are you sure they aren’t refusing to issue an ACH or wire?

Empower is huge. I’ve never heard of them not permitting a rollover to a 401k - it’s just sent via check to you payable to the new custodian. (Still a direct rollover)

 

[rachellee]

@vannitheng Yeah I didn’t know this was a direct rollover

 

[rachellee]

@vannitheng I think I just came to a realization - my HSA and brokerage accounts aren’t “rollovers” - they are ToA’s (transfer of assets).

Maybe if somebody wanted to rollover a 401(k) to another 401(k) that would a “rollover.”

My suspicion is “rollovers” equate to “check in the mail”. The name the check is made out to determines if it’s direct or indirect.

Is This correct thinking?

 

[vannitheng]

@rachellee Not quite.

A direct rollover can be a check, ACH, Wire, Journal entry, etc. A direct rollover just means it's a non-taxable event not subject to the 60 day requirement.

If someone elects to transfer one 401(k) to another 401(k), then that's a rollover as long as the funds are sent via ACH to the new vendor or the check is payable to the new vendor (it would be payable to "New Vendor FBO Your Name).

It's an indirect rollover subject to the 60 day requirement if the check is made payable to you as an individual (taxes will also be withheld).

You are correct that brokerage accounts are never "rolled over." They are just transferred to another account.

 

[asianized]

@rachellee I just did the same thing. I had a Merrill rep on the line, requesting a Direct rollover from a former Employee's 401k at Empower into my existing Merrill Edge Trad. IRA (which is from another rollover a while back). All funds are pre-tax.

The Merrill rep said that Empower doesn't do Direct rollovers, as he just had a similar experience with another customer recently. We got on a 3 way call, Merrill, me, and Empower, and I requested a Direct Rollover from my 401k at Empower to my Merrill Edge TIRA. Empower said they could not send the check directly to Merrill, and it HAD to be sent to me.

I was a bit confused because after being laid off from my ex-employer, they emailed me about what I would like to do with my 401k, and a Direct Rollover to IRA was one of the options. I tried to tell them to send the check directly to Merrill, but the Empower rep refused saying it had to be mailed to me. When asked, who should the check be out to, the Merrill rep jumped in and said make the check out to "Merrill", and For the Benefit of: Me (my name) and provided my plan number. Empower rep confirmed the total amount minus admin fees ($75), which was correct, will be mailed to my address.

Afterwards, the Merrill rep said deposit the check by taking a picture of it with the Merrill App.

I am just worried because I read that having a check sent to me could be penalized and taxed. I asked Empower rep if I have to deposit the check before 60 days, and she said no and they would send a 1099-R for my taxes even though the funds are pretax.

Both employer and employee contributions and earnings in my Empower 401k are 100% vested and the funds are >$7000. I decided to rollover to my TIRA because I already did one from a while back, so a backdoor in the future is not possible anyways. I've never made an after-tax contribution to any IRA.

I see from some replies here that if the check is made out to my new custodian, it is still a direct rollover and I should be good.

Would this apply to my case as well? I hope everything goes ok and I don't get penalized with taxes.