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$75 Fee To Transfer An IRA To A New Bank?

barry_NY
barry_NY   |     |   10 posts since 2015

I was charged a $75 fee to transfer an expired IRA CD to another bank!  Because of the new banking laws, it is difficult to just take a check from one bank for an expired CD and take it to a new bank to open a new IRA CD.  Only once per year are you allowed to take a check to a new bank.  After the first rollover, You must now request the new bank request the old bank mail a check directly to them,.  Are we now at the mercy of the banks to pay transfer fees because of the new banking laws, or is there a way around this?



Answers
ChrisCD
ChrisCD   |     |   130 posts since 2010
The great law of unintended consequences.  Getting the transfer rule/law reversed would be the best route to go.  I am surprised at the fee.  Most banks and credit unions don't charge a fee unless the funds are being wired.
Ratesaver
Ratesaver   |     |   14 posts since 2013
Barry

You are able to do a bank to bank transfer with your CD... Contact both banks and ok it with a walk over... That means you take a check over to the other bank and just open a I R A with them accepting it... Their should be no charge... You have 3 mo to get it done however do it quick.... NO taxes will be taken out of it...
barry_NY
barry_NY   |     |   10 posts since 2015
The new law allows this only once per year.  I already used my one paper check this year.  When I authorized the transfer, it never occured to me that there was a fee.

What is the purpose of this law, and does anyone know whtat the penalty is for exceeding the 1/year limit?
RickZ
RickZ   |     |   19 posts since 2010
The purpose of the law is to prevent people from abusing the rollover rule whereby they could string together a series of smaller rollovers thereby allowing for an extended period of personal loans far beyond the 60-day period.  Another case of dishonest people ruining things for those who play by the rules.

The following is from a very good article explaining the new once-per-year 60 day Rollover rules.  https://www.kitces.com/blog/understanding-the-new-once-per-year-60-day-rollover-rules-for-iras-and-the-exclusion-for-trustee-to-trustee-transfers/
 
"When funds are withdrawn from an IRA to be spent, they become taxable as ordinary income (with a possible early withdrawal penalty to apply as well). However, in some cases – especially in the early days of IRAs – the account owner might take a withdrawal from the IRA, not with an intent to spend the money, but simply because the owner was in the process of transferring the account to another financial institution. Alternatively, in other cases, the funds were withdrawn as a mistake (e.g., the ‘wrong’ account was liquidated where the account owner had an IRA and another bank or investment account).

To facilitate correcting such mistakes, and allowing for transfers between institutions, Congress included IRC Section 408(d)(3), which allows for an IRA distribution to be treated as a “rollover” that is contributed to a new account. Under the relatively straightforward rules, any distribution taken from an IRA would not be treated as taxable, as long as the funds were re-contributed to (the same or) another IRA within 60 days of receipt. Technically, it didn’t matter whether the purpose of the distribution was to facilitate a transfer, because it was taken as a mistake, or simply out of a desire to use the funds as a personal short-term loan; as long as the rollover contribution was made within 60 days, the distribution would not be taxed.

However, the caveat to this rollover rule is that it created the potential for abuse. An individual with a larger IRA could potentially chain together a series of smaller rollovers, allowing for an extended period of personal loans far beyond the 60-day period. For instance, an individual with a $100,000 IRA could take a $20,000 distribution, and then 59 days later take a second $20,000 distribution to repay first, and then another 59 days later take a third $20,000 distribution to repay the second, etc., ultimately stretching out a $20,000 60-day rollover into series that spans more than 9 months before the final $20,000 replacement must be made."
barry_NY
barry_NY   |     |   10 posts since 2015
Wow! Someone will always game the system, ruining it for everyone.

What if the check was made payable to the new financial institution?
me1004
me1004   |     |   537 posts since 2010
Seems they took the unthinking nuclear approach in limiting it to once per year --where they alternately could have limited gaming of the rules by saying first one gets 60 days, and any subsequent ones get maximum of, say, 7 days.

Seven days would thwart gaming the rules, because it would not be worth much at all  and additionally would take far more effort than it would be worth. And seven days would be long enough if you were simply planning to move your funds to a new IRA, as in going to a better CD elsewhere. A simple solution that leaves everyone happy.

Yes as it now  stands, they are forcing you into the fee system rather than letting you do it yourself. 

And consider that when you move funds to a new IRA -- look at the disclosure in advice to see about any fees involved later when you want to close it and move funds  from it. $75  is the highest fee for that I've heard of -- and there is no justification for that much.
barry_NY
barry_NY   |     |   10 posts since 2015
They changed the rules AFTER I opened the account.  The $75 fee was buried in the disclosures, but it never applied to me until the IRA rules changed this year.  I was boxed in, no way to avoid it.  Wiped out a years interest.

NYCB started as a community bank, but now I think they only want to be a large instituional bank.  I've been closing my personal and business accounts as they come due, or leaving a minimal deposit.
Al_TN
Al_TN   |     |   1 posts since 2015
I know that the $75 fee is frustrating and no one hates fees more than me, but if the institution performed the institution to institution transfer in a prompt and efficient manner then the $75 is not too bad.  I had a credit union transfer to another credit union and there was no fee but they played the "dumb and slow" game in getting it done.  Taking twenty something days to perform the tranfer on a fairly large IRA CD cost me alot more in lost interest than $75.  Just another thought about efficiency (or not).
dave9354
dave9354   |     |   28 posts since 2010
What bank charged the fee?
barry_NY
barry_NY   |     |   10 posts since 2015
New York Community Bank (Roslyn Savings Bank).  I first yelled at them for charging me the fee without my knowledge.  Then I found it listed in the fee schedule when I opened the account.  Never thought that this fee would apply to me.  The new banking laws this year forced me to do a "hands-off" account transfer.  Was this crazy law pushed through by banks to force people into paying the transfer fee?
Ally6770
Ally6770   |     |   1,974 posts since 2010
Time to email or call Elizabeth Warren. 
barry_NY
barry_NY   |     |   10 posts since 2015
The new law/rule was implemented by the current administration, which Elizabeth Warren is a disciple of.  This current administration is obsessed with this failed policy of 0% interest rates.  Like it or not, banks have to earn some profit, and they are supposed to earn that profit from interest paid minus bad loan write-offs.  If they are not allowed to earn a profit from interest, then they are forced to earn a profit by not giving risker loans and by raising fees.
Ally6770
Ally6770   |     |   1,974 posts since 2010
I was thinking of the Supreme Court ruling  allowing only one rollover a year or not allowing an on-line transfer to another financial institution by the individual.