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Subject:  Re: 401k to IRA procedures Date:  8/11/1999  11:00 AM
Author:  TMFPixy Number:  13066 of 88074

Greetings, Pikapp383, and welcome. You wrote in part:

<<I was told that she would have to contact the plan administrator directly and fill out some paperwork there and that then the administrator would liquidate the assets in the plan and send a check directly to Waterhouse.

While I was happy that we would not have to ferry the check from her previous employer to Waterhouse because that would ensure that there would be no withholding or 10% penalty, I was unhappy that we would have to talk to the plan administrator. The whole point of transferring was to get her money away from them because they have been a royal jerk to her, and they are ssssslllllooooooowwwwwwwwww.

When I moved my Roth from American Century to ETrade, I just filled out the forms at ETrade and they took care of the whole mess for me.

So, I guess my questions are, is it true that we HAVE to deal with the plan administrator to transfer the funds? Also, is it possible to transfer the shares of the fund directly without converting to cash at any time?>>

Yes, it is true you must coordinate with the plan administrator to get the 401k proceeds transferred to the IRA. Every employer plan has its own administrative quirks on plan distributions, and a transfer is a distribution. As an example, some will not send the plan proceeds directly to the IRA custodian. Instead, the administrator will cut a check payable to "XYZ Fund/Brokerage FBO of (Plan Participant's Name Here)." That check gets mailed to the separated participant who, in turn, must send it on to the IRA custodian for deposit. Because the check is not cashable by the employee (only the new IRA custodian), the effect is still the same as a direct transfer (i.e, no withholding or taxes/penalty to worry about, but it's still a pain. Thus, coordination with the plan adminstrator to ensure the check is issued correctly is essential.

As to transferring the fund shares directly to the IRA, that won't happen. Her shares in that fund within the 401k will be cashed out, and she will have to repurchase them in the IRA.

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