Finn Torode
I recently changed jobs and would like to transfer my 401(k) plan from my previous employer over to an IRA account. Is there a time limit to complete the rollover?
In general, you have 60 days to complete the rollover once you receive a distribution from an IRA or qualified plan such as a 401(k) or 403(b) account. If the rollover is not completed within the 60-day period, the distribution will be treated as a taxable distribution and subject to federal (and state income taxes, where applicable). In addition, the distributed amount may be subject to an additional 10 percent early distribution penalty.
In certain situations, the IRS will waive 60-day time limit. Taxpayers can receive an automatic wavier if all of the following are true:
The financial institution receives the funds on your behalf before the end of the 60-day rollover period.
You followed all the procedures set by the financial institution for depositing the funds into an eligible retirement plan within the 60-day period (including giving instructions to deposit the funds into an eligible retirement plan).
The funds are not deposited into an eligible retirement plan within the 60-day rollover period solely because of an error on the part of the financial institution.
The funds are deposited into an eligible retirement plan within 1 year from the beginning of the 60-day rollover period.
It would have been a valid rollover if the financial institution had deposited the funds as instructed.
If your particular circumstances do not allow you to qualify for an automatic wavier, you can apply directly to the IRS for a wavier of the 60-day rollover requirement based on your specific facts and circumstances. Typically, the IRS will take into account various circumstances in determining whether to grant the wavier or not. Some of these circumstances include:
Whether errors were made by the financial institution;
The amount of time that has passed since the distribution was made;
Whether the funds distributed were used by the taxpayer; and
Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error.
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