We have travelled on the retirement plans journey for many weeks and one thing is certain; we are far from having covered everything. Yet, there is one topic we cannot ignore before ending this series, and that is rollovers from one retirement plan to another.

A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan.

This rollover transaction isn't taxable, unless the rollover is to a Roth IRA, but it is reportable on your federal tax return.

There are different reasons you may want or have to rollover funds from one retirement plan to another, your employment situation has changed, you want to switch investments, or you've received death benefits from your spouse's retirement plan.

Most pre-retirement payments you receive from a retirement plan or IRA can be rolled over by depositing the payment in another retirement plan or IRA within 60 days. You can also have your financial institution or plan directly transfer the payment to another plan or IRA.

There is a Rollover Chart on the IRS website which summarizes allowable rollover transactions.

When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred.

If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions.

You can complete a rollover in one of the following ways.

1. Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
   
   
2. Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
   
   
3. 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan, so you’ll have to use other funds to roll over the full amount of the distribution.

You have 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. The IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of circumstances beyond your control.

You generally cannot make more than one rollover from the same IRA within a 1-year period, regardless of the number of IRAs you own. You also cannot make a rollover during this 1-year period from the IRA to which the distribution was rolled over.

The one-per year limit does not apply to:

• Rollovers from traditional IRAs to Roth IRAs. When you convert a traditional IRA to a Roth, you will owe taxes on any money in the traditional IRA that would have been taxed when you withdrew it.
  
  
• Trustee-to-trustee transfers to another IRA;
  
  
• IRA-to-plan rollovers;
  
  
• Plan-to-IRA rollovers;
  
  
• Plan-to-plan rollovers.

Once this rule takes effect, you must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover (other than a rollover from a traditional IRA to a Roth IRA) in the preceding 12 months, and you may be subject to the 10% early withdrawal tax on the amount you include in gross income.

You can roll over all or part of any distribution from your IRA except:

You can roll over all or part of any distribution of your retirement plan account except:

Distributions that can be rolled over are called eligible rollover distributions. Of course, to get a distribution from a retirement plan, you have to meet the plan’s conditions for a distribution, such as termination of employment.

An IRA distribution paid to you is subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld.

You can avoid withholding taxes if you choose to do a trustee-to-trustee transfer to another IRA.

A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later.

Withholding does not apply if you roll over the amount directly to another retirement plan or to an IRA. A distribution sent to you in the form of a check payable to the receiving plan or IRA is not subject to withholding.

If you have not elected a direct rollover, in the case of a distribution from a retirement plan, or you have not elected out of withholding in the case of a distribution from an IRA, your plan administrator or IRA trustee will withhold taxes from your distribution. If you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld.

The plan administrator must give you a written explanation of your rollover options for the distribution, including your right to have the distribution transferred directly to another retirement plan or to an IRA.

If you’re no longer employed by the employer maintaining your retirement plan and your plan account is between $1,000 and $5,000, the plan administrator may deposit the money into an IRA in your name if you don’t elect to receive the money or roll it over. If your plan account is $1,000 or less, the plan administrator may pay it to you, less, in most cases, 20% income tax withholding, without your consent. You can still roll over the distribution within 60 days.

If you receive an eligible rollover distribution from your plan of $200 or more, your plan administrator must provide you with a notice informing you of your rights to roll over or transfer the distribution and must facilitate a direct transfer to another plan or IRA.

Your retirement plan is not required to accept rollover contributions. Check with your new plan administrator to find out if they are allowed and, if so, what type of contributions are accepted.

There is a lot more to be said about rollovers; this newsletter is only intended to give you a general idea of what rollovers are and how they work.

It is imperative you get all the necessary information regarding your retirement plans (including the rules for rollovers) from your plan administrator. In any case, your best choice will always be to rely on the advice from a professional so that you make sure your retirement funds are secure and offer the right options for your particular financial situation.