My Plan Custodian Will Only Issue a Check, Now What?

My Plan Custodian Will Only Issue a Check, Now What?

Checks Issued Could Still Qualify as a Trustee-to-Trustee Transfer…

If you want to do a direct transfer (trustee‐to‐trustee transfer) but your current IRA custodian or plan administrator will only issue a check, all hope is not lost.   If a check is made payable to you, that transaction will trigger the 60‐day rollover rules. In addition, if the check is not from your IRA but is issued by a qualified employer plan such as your 401(k) for example, the issuance of the check usually triggers a mandatory 20% withholding.

How Can You Fix This Problem?

If the plan will not do a trustee-to-trustee transfer (sometimes called a direct rollover) to an IRA or eligible retirement plan and you are told they must issue you a check, there is a work around. The check may still qualify as a trustee‐to‐trustee transfer if the check is made out directly to the receiving IRA instead of you, the IRA owner. Regulation Section 1.401(a)(31)‐1, Q&A‐4 tells you exactly how to make the check out so that the transaction qualifies as a direct rollover.