Direct Rollover Distribution From Ex Employer Pension Plan To Bank IRA Savibgs Account

Confused1 | May 24, 2018 | 87 posts since 2018

The use of the word "rollover" seems to have many different meanings when it comes to iRA's so I want to make sure I do this properly to avoid any tax consequences. I am in process of opening Traditional IRA SAVINGS accounts at 3 online banks that will receive my distribution. Once the funds are received into the savings accounts then I plan to open IRA CD ladders of short and long term certificates. Since the distribution was originally deposited into a IRA savings account and I'm just moving the funds to IRA CD's, is this the correct and legal way to do it or should I be having the CD's set up first and specifying how much should be deposited into each and every CD on my distribution election form for my ex employer Also, if I move these funds when the CD's mature to a different bank or credit union, is that considered a IRA trustee to trustee transfer and is there any rules regarding that that I need to be aware of? Thanks for your feedback

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Answers

Ally6770 | May 24, 2018 | 4,294 posts since 2010

Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own. The one-per year limit does not apply to: rollovers from traditional IRAs to Roth IRAs (conversions) trustee-to-trustee transfers to another IRA.

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Confused1 | May 24, 2018 | 87 posts since 2018

That's part of my confusion, I'm thinking and hoping that rule would not apply to me since I'm not touching the money, I'm doing a direct rollover, I think that rule only applies to a 60 day rollover?

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ChasR | May 25, 2018 | 287 posts since 2013

BTW--I believe the bank that treated a transfer from an IRA money market fund to an IRA CD account on its own books as a reportable "rollover" was wrong. Even if the two accounts are treated as separate IRAs, the transfer should qualify as a non-reportable trustee-to-trustee transfer because the customer never gets his hands on the money.

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ChasR | May 25, 2018 | 287 posts since 2013

Correction After Finding Relevant Paperwork: I dug out my documents and I saw that I was actually trying to transfer IRA funds, with no EWP, from a bank's (Synchrony) IRA CD to a Synchrony IRA MMA. I was told I could only do this by rollover because Synchrony treated the IRA CD and the IRA MMA as distinct IRAs, rather than parts of the same IRA. I don't know if this still represents Synchrony's position on internal rollovers, If so, the transfer should nevertheless be doable, without reporting a rollover, as a trustee-to-trustee transfer.

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Ratesaver | May 27, 2018 | 187 posts since 2013

Tryj not using the word rollover because it is confusing to say the least as speaking of IRA"s ... Trustee to trustee is better. I did somewhat the same as you are going to do however I had all the ira money sent directly to the bank as so I thought... Short story ,,, Open the cds directly and forget the savings acc... If you can.... Speek to the bank or credit union on the phone to get a better picture of what is going to happen... Get the persons name you spoke to ect... I thought I had everything in order but then the checks were sent to me with The banks name on them ... I had to sign them and forward them to the bank... Everything worked out but it was a shock when they came to me...Of course I did not cash them. I sign and sent... If you can go to a branch if possible ...Good luck

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Confused1 | May 28, 2018 | 87 posts since 2018

I totally agree, but the plan documents specifically uses the word direct rollover to an IRA as my only option other than an annuity. I've heard so many other horror stories about the banks not doing it properly so I'm just trying to get as much information on the process as I can. Your advice is spot on, maybe dealing with a local banks might be the answer for now to get this initial rollover handled and then if need to move the funds later to a different bank for a better rate, it will just be the normal trustee to trustee transfer that I've done before with my Roth IRA's. Thanks for your advice and have a wonderful day.

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ChasR | May 25, 2018 | 287 posts since 2013

I discovered last year that what is considered an IRA "rollover"--and reported as such to the IRS--can vary from bank to bank. For example, when I tried to transfer funds from an IRA money account at one particular bank into an IRA CD account at the very same bank, the bank asked me to sign a "rollover" request. When I balked, they told me that, at their bank, IRA money market accounts and IRA CD accounts were treated as distinct "IRAs," and the movement of funds from one to another was treated as a "rollover" reportable on Form 5498 and subject to the "one-every-12-months" rule. At other banks, internal transfers from an IRA savings or money market account to an IRA CD are not considered rollovers. Properly documented direct trustee-to-trustee transfers are also not reported as rollovers. You must be very careful here, is all I can say for sure. Thus, in 2016, Fidelity improperly booked a trustee-to-trustee transfer of assets I made from one of my bank IRAs as a rollover contribution. I had to have it issue a corrected Form 5498 to the IRS.

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