UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: Digerati Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76095  
Subject: Thorny 401k rollover problem Date: 10/9/1997 9:10 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I recently started a new job. Both my previous and current employers offer 401k plans, so I applied to my previous employer for a check to rollover into my current employer's plan.

Part of my current employer's rollover process involves getting a form signed by the 401k admin at my previous employer that testifies that the plan has received a favorable IRS determination/notification/opinion confirming its tax-qualified status under the Tax Reform Act of 1986.

My previous employer is a Delaware corporation that was established in March 1995. It does not have an IRS determination for its 401k plan, though one is pending.

My new employer's benefit department is refusing to take the rollover check until my previous employer can confirm a favourable IRS determination. So, I'm stuck with a worthless 401k rollover check (it took 6 months of unbelievable bureacracy to get this far, so I'm more than a little upset)

I have a letter from my previous employer that confirms that the 401k plan is intended to be a qualified plan and is maintained and operated in accordance with the requirements of 401(a) and 501(a) of the Internal Revenue Code.

Will this letter do? Is it reall a 'hard' requirement that this IRS opinion be available before the money can be rolled over? If not, what other options are available?

Thanks,

Digerati
Print the post Back To Top
Author: GaFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 441 of 76095
Subject: Re: Thorny 401k rollover problem Date: 10/9/1997 9:24 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I am not the expert here, but assuming that you can get the check re-cut(and it was not made payable to you in the first place), you may want to check local banks to find someone willing to accept the funds by setting up an IRA account using a, say, 3-month CD. This must be a new account marked "Qualified Pension Plan Rollover" (very important) and you cannot add any other monies to it, either as contributions or from other IRA accounts.
->BE SURE IT IS MARKED AS A "QUALIFIED PENSION PLAN ROLLOVER" AFTER IT IS SETUP.<-
When the CD matures, request a rollover to your new employer's plan. You can only rollover accounts marked as above. Your new plan administrator should not have a problem with this since the money will be coming from a "qualified trustee".


Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 449 of 76095
Subject: Re: Thorny 401k rollover problem Date: 10/10/1997 11:46 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Greetings, Digerati, and welcome.

<<I recently started a new job. Both my previous and current employers offer 401k plans, so I applied to my previous employer for a check to rollover into my current employer's plan.

Part of my current employer's rollover process involves getting a form signed by the 401k admin at my previous employer that testifies that the plan has received a favorable IRS determination/notification/opinion confirming its tax-qualified status under the Tax Reform Act of 1986.

My previous employer is a Delaware corporation that was established in March 1995. It does not have an IRS determination for its 401k plan, though one is pending.

My new employer's benefit department is refusing to take the rollover check until my previous employer can confirm a favourable IRS determination. So, I'm stuck with a worthless 401k rollover check (it took 6 months of unbelievable bureacracy to get this far, so I'm more than a little upset)

I have a letter from my previous employer that confirms that the 401k plan is intended to be a qualified plan and is maintained and operated in accordance with the requirements of 401(a) and 501(a) of the Internal Revenue Code.

Will this letter do? Is it reall a 'hard' requirement that this IRS opinion be available before the money can be rolled over? If not, what other options are available?>>

A recent change made it easier for a new employer's qualified retirement plan to accept money from an old employer's plan. Previously, if a plan accepted -- knowingly or unknowingly -- money that later turned out not to have come from a qualified plan, the new employer's plan was disqualified and terminated. Thus, employers imposed strict guidelines on such acceptance, and rightfully so.

That was eased this year to allow employees greater portability of retirement benefits between employers. Now, the employer may accept such money in good faith even if it later turns out to be disqualified. In that case, the money is simply returned to the employee with no penalty to the new plan. However, the change did not say a new employer's plan must accept old plan money. Plans are still free to impose their own limits on what they will accept. Yours obviously imposes a stricter standard. There's not much you can do about that except to point out the barrier doesn't need to be so high anymore.

As to your other options, GaFool gave you one approach that might work. The only addition I would make is to wait until your old employer gets the letter of determination from the IRS prior to trying again. Your new employer doesn't have to accept the IRA custodian's word and can impose the same requirement on you. It just makes it easier if you wait.

If you're confident in investing on your own, you may even want to forego a transfer to you new plan. Just get the check reissued to a self-directed IRA custodian and do-it-yourself. Chances are you'll do far better for yourself than the standard 401k anyway.

Regards.....Pixy

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 450 of 76095
Subject: Re: Thorny 401k rollover problem Date: 10/10/1997 11:48 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Yo, GaFool.

<<I am not the expert here, but assuming that you can get the check re-cut(and it was not made payable to you in the first place), you may want to check local banks to find someone willing to accept the funds by setting up an IRA account using a, say, 3-month CD. This must be a new account marked 'Qualified Pension Plan Rollover' (very important) and you cannot add any other monies to it, either as contributions or from other IRA accounts.
->BE SURE IT IS MARKED AS A 'QUALIFIED PENSION PLAN ROLLOVER' AFTER IT IS SETUP.<-
When the CD matures, request a rollover to your new employer's plan. You can only rollover accounts marked as above. Your new plan administrator should not have a problem with this since the money will be coming from a 'qualified trustee'.>>

Great response! While the employer may still impose additional proof requirements like the IRS determination letter, most plans would accept this approach.

Regards.......Pixy

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement