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Rollovers, Transfers and the New IRS Rollover Rule

Estimated reading time: 1 minutes, 30 seconds

by Tara Bogard, Business Development Officer

According to the IRS, beginning January 1, 2015, an individual may make only one rollover from an IRA to another IRA in any 12-month period, regardless of the number of IRAs he or she owns. Please note that the funds can be deposited back into the original IRA as well.

An IRA-to-IRA rollover is most commonly known as a 60-day rollover. A 60-day rollover occurs when the current IRA custodian processes a distribution to the client. The client then has 60 days to ensure that the funds are back in an IRA—either the original IRA the funds were distributed from or another like IRA. Also, the funds must be posted to the IRA prior to the 60-day deadline to avoid any tax penalties.

To clarify, it is the 60-day rollover, or IRA-to-IRA rollover, that can only be completed once in any 12-month period. Rollovers from a qualified plan and direct IRA-to-IRA transfers do not apply to this new implementation. Annual contributions can still be made throughout the year until the maximum contribution amount is met.

Notice the difference between a rollover from a qualified plan (QP) and a transfer:

  • In a rollover from a QP, the client initiates a rollover from a qualified plan through his or her plan administrator. In most cases, the plan administrator then sends the requested amount of funds to the IRA custodian.
  • In an IRA-to-IRA transfer, the new IRA custodian initiates a transfer on behalf of the client. The transfer form, signed by the client, is countersigned by the new custodian and forwarded to the releasing custodian. The releasing custodian then sends funds directly to the new IRA custodian.

We hope this helps clear up any confusion regarding the IRS’s new rule. Should you have any questions, please feel free to contact our office at 888.753.6972.

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