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Neurospouse has been retired 5 years or so and has a nice 401K balance and profit sharing account.
We are looking to roll it into accounts at my broker (where she already has an IRA and Roth).
The 401K administrator has told her we need to provide them exactly how my broker wants the check to be made out. They said they would then mail us the check and we would have to send it to the broker.

Is this normal?
Why would it require a physical check?

I don't recall physical checks being used when I moved my own 401K 7 years ago, nor in her previous small rollover 20 years ago.

It would seem to me that with the routing number and account number it should be able to move electronically. All she should have to do should be to authorize the transaction.

The whole process can apparently take 2-4 weeks during which time a significant dollar amount is essentially sitting in cash and the transaction time dependent on the mail system.

Not sure why they can't simply convert all to cash at the end of a specific day and electronically send it to an authorized account. Well maybe not same day but a least something like settlement day for the sale of the assets.
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Neurospouse has been retired 5 years or so and has a nice 401K balance and profit sharing account.
We are looking to roll it into accounts at my broker (where she already has an IRA and Roth).
The 401K administrator has told her we need to provide them exactly how my broker wants the check to be made out. They said they would then mail us the check and we would have to send it to the broker.

Is this normal?
Why would it require a physical check?


Not sure it is normal, but that's how my wife's 401(k) rollover was handled, as well.

It was just a little stressful getting the largest check ever in our lives (and around 40% of our net worth) mailed to us, and then sent on. Just a few days hoping nothing got lost in the mail.
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Is this normal?
Why would it require a physical check?

I don't recall physical checks being used when I moved my own 401K 7 years ago, nor in her previous small rollover 20 years ago.


Not sure it is normal but I think it has more to do with the specific institutions involved. I have done this twice: 5 years ago and 1 year ago. Five years ago everything was done at a local branch office, but the key was, everything was with the same huge company, Fidelity. Last year, with a small local outfit, it was fill out paperwork, get a physical check, then take the check to Fidelity branch office.

JLC
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Is this normal?
Why would it require a physical check?

I don't recall physical checks being used when I moved my own 401K 7 years ago, nor in her previous small rollover 20 years ago. - Neuromancer


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What you are wanting to do is called a trustee to trustee transfer, direct from one to the other with no middle man (you)and no paper check. The usual way this done is to contact the receiving trustee, in this case your broker, and let them initiate the transfer. You provide an authorization to your broker, which empowers them to go get the balance from the other trustee, the 401K provider.

Be aware that moving to your Traditional IRA will be tax free but moving to your Roth will be a taxable conversion.
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What you are wanting to do is called a trustee to trustee transfer, direct from one to the other with no middle man (you)and no paper check. The usual way this done is to contact the receiving trustee, in this case your broker, and let them initiate the transfer.

That works for IRA-to-IRA, but not necessarily for 401k-to-IRA rollover.

When I did this, many years ago, my 401K mailed me a physical check made out to "E-Trade, F.B.O. {me}"
F.B.O. is "for the benefit of". This is probably what his 401K is asking for, how the check is to be made out.

Since the check is to Etrade (or other broker), it is not considered as received by him, even though he has the check in his hand. Therefore, trustee to trustee.


moving to your Traditional IRA will be tax free but moving to your Roth will be a taxable conversion.

None of my transfers would the receiving broker allow an IRA-to-Roth transfer. They always required IRA-to-IRA transfer and then I could convert the IRA to a Roth. Avoids possible complications.
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>>What you are wanting to do is called a trustee to trustee transfer, direct from one to the other with no middle man (you)and no paper check. The usual way this done is to contact the receiving trustee, in this case your broker, and let them initiate the transfer.<<

That works for IRA-to-IRA, but not necessarily for 401k-to-IRA rollover. - rayvt


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When I left Giant Corp in 2004, my 401K transfer was handled trustee to trustee so I suppose that it really depends on what the 401K providers policy is.

In my case the transfer was into a TIRA, so I can't comment on whether the Roth was possible. But I do agree the taxes, tax withholding, tax submission picture gets sticky so maybe they would not have done the Roth even if I did ask.
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When I left Giant Corp in 2004, my 401K transfer was handled trustee to trustee so I suppose that it really depends on what the 401K providers policy is.

In my case the transfer was into a TIRA, so I can't comment on whether the Roth was possible. But I do agree the taxes, tax withholding, tax submission picture gets sticky so maybe they would not have done the Roth even if I did ask.


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Something else I just remembered which may help Neuromancer or others make a better decision than I did.

I was an HCE and my contributions exceeded some sort of threshhhold resulting in my 401K having some after tax money in it. I was offered the option of withdrawing the after tax component and only transfering the pre-tax value to the TIRA. Like an idiot, I told them to transfer it all. So I ended up with a tax basis in the TIRA and the blessing of a form 8606 for the past 18 years.
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Try very hard to do a trustee to trustee transfer if you can.

If a check is written, the 401k can be required to take withholding. That goes to the IRS. You must make it up in what goes to the IRA or it gets treated as a penalty distribution.
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"Be aware that moving to your Traditional IRA will be tax free but moving to your Roth will be a taxable conversion."

Thanks, but I do know that. There is a 7% component which was after tax contributions. That's going in the Roth.
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"I was offered the option of withdrawing the after tax component and only transferring the pre-tax value to the TIRA."

Thanks for that tip. I will need to check on how they will handle the after-tax contributions. The latter years of her employment, the 401K offered an option to make the withholdings (or a percentage of them) post-tax, in effect a Roth-401K but I don't believe they actually called it that.
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Here is what I did. My 401k was with Fidelity and I rolled it into an IRA. After it was in an IRA I contacted Schwab and told them I wanted to roll it to them. Easy Peasy. No paperwork, all electronically.

Andy
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What you are wanting to do is called a trustee to trustee transfer, direct from one to the other with no middle man (you)and no paper check.

Actually, physical checks from 401(k) plans that are made out to "Neurospouse's IRA Administrator, FBO Neurospouse" (or something similar), mailed to Neurospouse and then deposited by Neurospouse into the IRA are trustee-to-trustee transfers. That's because the check is not made out to Neurospouse, but rather, to the IRA administrator, For Benefit Of (FBO) Neurospouse.

The usual way this done is to contact the receiving trustee, in this case your broker, and let them initiate the transfer.

Yes, it can work that way. But some 401(k) plans don't like to do that, and require that the transfer be initiated on their end.

AJ
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Try very hard to do a trustee to trustee transfer if you can.

If a check is written, the 401k can be required to take withholding.


Just because a check is written doesn't mean that it's not a trustee-to-trustee transfer. The check just needs to be made out correctly. Generally, it needs to be payable to "Neurospouse's IRA Adminstrator, FBO Neurospouse".

AJ
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Something else I just remembered which may help Neuromancer or others make a better decision than I did.

I was an HCE and my contributions exceeded some sort of threshhhold resulting in my 401K having some after tax money in it. I was offered the option of withdrawing the after tax component and only transfering the pre-tax value to the TIRA. Like an idiot, I told them to transfer it all. So I ended up with a tax basis in the TIRA and the blessing of a form 8606 for the past 18 years.


18 years ago, you were required to take your after-tax contributions either in cash or roll them into a T-IRA and create basis. The IRS did not clarify the ability to roll after-tax contributions into a Roth until 2014, through Notice 2014-54 https://www.irs.gov/retirement-plans/rollovers-of-after-tax-...

Since that clarification, you can roll after-tax contributions directly into a Roth IRA at the same time as rolling the pre-tax earnings and contributions into a T-IRA. It is also possible to roll pre-tax money directly into a Roth IRA, although not all plan administrators like to do that, and some may require a 2 step process, into a T-IRA and then from the T-IRA into a Roth IRA.

That said, back in the 90s, I took my after-tax contributions in cash, rather than create basis in my T-IRA.

AJ
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Is this normal?

Exceptionally normal. In fact, I can't recall a situation where a physical check wasn't sent.

Why would it require a physical check?

They might be willing to wire it - for a fee. Since your 401k company makes the rules, they probably don't want to deal with the hassle and the liability of an EFT.

I don't recall physical checks being used when I moved my own 401K 7 years ago, nor in her previous small rollover 20 years ago.

I can assure you that if you did not get a check from a rollover, then you very likely paid a wire fee.

Not sure why they can't simply convert all to cash at the end of a specific day and electronically send it to an authorized account.

Lot's of IRS reporting issues with such transfers and I imagine that there is a significant fraud risk when there is not a clear paper trail. I sometimes have to provide written certification for clients if they fund an account without a clear paper trail as to where the money came from. I doubt your broker would automatically know that the check came from a 401k vs a roth 401k vs simply a taxable account. That sort of coding doesn't really exist within the EFT system.
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You provide an authorization to your broker, which empowers them to go get the balance from the other trustee, the 401K provider.

I don't think it is possible for an IRA to pull form a 401k. Money has to be pushed to an IRA from the 401k by initiating the request with the 401k provider.
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Just because a check is written doesn't mean that it's not a trustee-to-trustee transfer. The check just needs to be made out correctly. Generally, it needs to be payable to "Neurospouse's IRA Adminstrator, FBO Neurospouse".

I needed a check done that way to transfer a portion of my 401k to another financial entity as an IRA. There was no withholding.

Transferring my 401k at Fidelity to an IRA at Fidelity was extremely easy, with no paperwork. Recharacterizing some of my Fidelity IRA to a Fidelity Roth IRA was easier still.
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Neuromancer: "Neurospouse has been retired 5 years or so and has a nice 401K balance and profit sharing account.

We are looking to roll it into accounts at my broker (where she already has an IRA and Roth).
The 401K administrator has told her we need to provide them exactly how my broker wants the check to be made out. They said they would then mail us the check and we would have to send it to the broker.

Is this normal?
Why would it require a physical check?"


I do not know if it is "normal" but it is not required by federal law. It might be a policy of the 401k administrator. Probably to discourage transfers because it reduces AUM and thus fees to the administrator.

"Not sure why they can't simply convert all to cash at the end of a specific day and electronically send it to an authorized account. Well maybe not same day but a least something like settlement day for the sale of the assets."

I did this recently with a decades old 401k. It was transferred electronically to my Fidelity IRA. I asked Fidelity to start the process and then eventually we had a three-way call to authorize the administrator to deliver the funds electronically. Sold, wired, invested the next day. No withholding issue and no weeks out of the market, either. And I do not recall paying a wire fee. Perhaps I did or perhaps Fidelity covered it.

I would escalate because you should be able to do what you want. And I assume that if you wanted a withdrawal the administrator would wire to your bank account (not that I am suggesting that course of action) but demonstrating the the administrator will moe funds electronically.

Regards, JAFO
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I can assure you that if you did not get a check from a rollover, then you very likely paid a wire fee.

Not necessarily. Since at least 1996 (and probably long before), Fidelity has had a policy that if you roll a 401(k) managed by Fidelity into an IRA held at Fidelity, it will not only be free to open the IRA, with little/no paperwork (your verbal consent is recorded), they will waive the $50 fee for closing a 401(k) account that seems to be a standard part of their 401(k) administration package that employers sign up for. I suspect other 401(k) administrators have similar marketing pushes to keep the 401(k) assets under their management in IRAs, but Fidelity seems to be especially good at it.

In 1996 (and each time since), I still chose to roll my Fidelity 401(k) into my Vanguard IRA. I had to fill out paperwork, pay the $50 fee, get a physical check made out to "Vanguard, FBO aj485" in the mail, and turn around and mail the check to Vanguard. I continued to do so with every Fidelity administered 401(k) where I left that job. There were 5, so I paid $250 and 5 stamps, and took probably 10 hours of time to close my 401(k) accounts.

AJ
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" My 401k was with Fidelity and I rolled it into an IRA. After it was in an IRA I contacted Schwab and told them I wanted to roll it to them. Easy Peasy. No paperwork, all electronically."

This seems likely to be the way I will handle it. It's not with Fidelity (it's Empower Retirement), but they do offer (and encourage) opening accounts there and rolling to them. They say that can be done quickly (overnight?).

Then I'll transfer appropriately to Etrade accounts. Apparently financial companies prefer to be non-efficient (perhaps to allow customers to make mistakes that generate fees).

Maybe I'll leave a token dollar amount to make them keep the accounts open to annoy them...
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This seems likely to be the way I will handle it. It's not with Fidelity (it's Empower Retirement), but they do offer (and encourage) opening accounts there and rolling to them. They say that can be done quickly (overnight?).

Then I'll transfer appropriately to Etrade accounts.


Be sure you are aware of any fees to close an IRA or to transfer non-cash assets, if your money is placed in anything other than a cash account. If those fees are more than any fee to close the 401(k), you may want to go the physical check route.

Apparently financial companies prefer to be non-efficient (perhaps to allow customers to make mistakes that generate fees).

No, it's not that they're trying to be non-efficient. It's that they're trying to keep their 'Assets Under Management' (AUM) numbers up by keeping the money in an account managed by them.

Maybe I'll leave a token dollar amount to make them keep the accounts open to annoy them...

Again, be aware of any minimum required balance to avoid fees.

AJ
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I just did this (August, 2021) with Merrill Lynch (outbound 401K) to Fidelity (inbound rollover IRA).

It was a 5 minute phone call with Merrill, giving them my Fidelity account number and the address to send the payment to at Fidelity. It surprised me that it appears to be some form of non-electronic payment (paper check?) in 2021; but for $25 extra they "overnighted" the payment so it would complete in 3-5 business days.
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Would be worth the $25 for a bank to bank transfer to me I’m frightened of sending more than 4 figures via snail mail. I would worry until it got there.
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I’m frightened of sending more than 4 figures via snail mail. I would worry until it got there.

Imagine how Harry Winston felt when he mailed the Hope Diamond to the Smithsonian by regular mail.

When he donated the Hope Diamond to the Smithsonian Institution in 1958, jeweler Harry Winston sent the fabled gem by registered first-class mail. This package carried the diamond on its trip from New York City to Washington, D.C. Of the $145.29 mailing price, only $2.44 was for postage. The balance was the insurance fee for $1 million.
https://www.si.edu/newsdesk/snapshot/hope-diamond-mail-wrapp...

Of course the mail service is being run by “different people” now, so ymmv.
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Imagine how Harry Winston felt when he mailed the Hope Diamond to the Smithsonian by regular mail.

"Registered" first class mail is not ordinary first class mail. Registered mail is tracked every step of the way with signed off receipts at each transfer. Registered mail is still used today for shipping high value documents and items.

Back in 1958, the ordinary first class rate was $.04 for the first ounce and $.03 per additional ounce (or fraction). Since the diamond itself weighs less than 1/2 ounce, it could have been mailed for far less than $1 (including packaging weight). The remaining cost (of the $2.44) was for the additional postal services (without insurance).

For comparison purposes, if the Hope diamond were to be mailed the same way today (assuming the same $1million insured value), the cost would be $1212.10 plus first class postage, but would only include $25,000 of insurance (the most the USPS offers today). There could be a few additional fees depending on whether restricted delivery was requested and the detail and delivery method for any requested receipts.

Ira
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Registered" first class mail is not ordinary first class mail. Registered mail is tracked every step of the way with signed off receipts at each transfer. Registered mail is still used today for shipping high value documents and items.

I suppose that may be necessary for legacy legal reasons, but Priority Mail is tracked at every handoff and offers a prediction of when delivery can be expected within 2-3 days from date of mail. The Hope Diamond would probably have cost $10 or so to mail. Insurance probably not available on that scale any longer.
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I suppose that may be necessary for legacy legal reasons, but Priority Mail is tracked at every handoff and offers a prediction of when delivery can be expected within 2-3 days from date of mail. The Hope Diamond would probably have cost $10 or so to mail. Insurance probably not available on that scale any longer.

Priority mail goes through the regular mail handling system, but with higher priority. It is tracked, but can, and often enough does, get lost or misdirected. Registered mail travels via locked security pouch with the signature of every person handling it tracked. There is a documented chain of custody between sender and recipient.

The difference between the two is a trade off between speed and security. As to insurance, the USPS will only insure up to $25,000 of value at present.

Ira
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"often does"??

I find the mail I send and receive almost never gets lost. Maybe I'm just charmed, but it's very rare that something doesn't arrive in a timely manner.

I almost never use FedEx or UPS (sending). Not that I have anything against them, but USPS is usually cheaper and works great.
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Oddly enough, I had to file a claim today for a lost overnight UPS package. First time I have had to do that.
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I sent my federal tax return via registered mail and never received any confirmation they received it. This was many, many months ago. I made the payments electronically and have the receipts for them so I'm not worrying about it.
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Before he retired, I knew (and still know) a guy who refused to use UPS because of a bad experience. He worked for an educational software company, and for whatever reason he was setting up hardware to send in advance of his arrival at the site to train people on it. As he put it, when he showed up it looked like there had been an attack by Zulu warriors. He spent most of his trip repairing the hardware.

I've only ever once had an issue with UPS. I sent something (I think it was return merchandise?), and they never got it. UPS put out tracers, but never found it.
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I find the mail I send and receive almost never gets lost. Maybe I'm just charmed, but it's very rare that something doesn't arrive in a timely manner.

Perhaps you just aren't sending enough mail to hit the problems? Probably true for almost everyone except the unlucky few and those who send a lot of mail.

I had a little 'side business' for a while selling books on Amazon -- it's true that %wise most transactions were trouble free but I had a few where it took a month or more beyond what USPS said. Thankfully my worst cases were one priority pkg with delivery confirmation which came back to me about week after it was 'confirmed' delivered and one package delivered open with different contents than what I sent. Of course I wasn't exactly high volume mailing either -- but I sure wouldn't bet the Hope Diamond on regular mail.
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I find the mail I send and receive almost never gets lost. Maybe I'm just charmed, but it's very rare that something doesn't arrive in a timely manner.

Perhaps you just aren't sending enough mail to hit the problems?


The Countess sells a lot of stuff on e-Bay. We take packages to the post office almost every day. (She is rated a "Top Rated Seller".) Of course she uses her own printer to print the labels and pays the postage on line. She always gets tracking. She has never lost a package. (Of course this doesn't keep some buyers from complaining if delivery takes more than a few days.)

CNC
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