2.8- Rollovers from Retirement Plans

A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan. This rollover transaction isn't taxable, unless the rollover is to a Roth IRA or a designated Roth account from another type of plan or account, but it is reportable on your federal tax return. You must include the taxable amount of a distribution that you don't roll over in income in the year of the distribution.

Ineligible Distributions

Certain distributions from an eligible retirement plan can't be rolled over, including:

1. Generally, the nontaxable part of a distribution, unless to an IRA;

2. A distribution that's one of a series of payments made for your life (or life expectancy), or the joint lives (or joint life expectancies) of you and your beneficiary, or made for a specified period of 10 years or more;

3. A required minimum distribution;

4. A hardship distribution from an employer retirement plan;

5. Dividends paid on employer securities; or

6. The cost of life insurance coverage.

Other exclusions exist for certain loans and corrective distributions.

Timeframe to Complete a Rollover

If a plan pays you an eligible rollover distribution, you have 60 days from the date you receive it to roll it over to another eligible retirement plan. Or, if you have a qualified plan loan offset amount, you have until the due date (including extensions) for the tax year in which the offset occurs to complete an eligible rollover. Refer to Publication 575, Pension and Annuity Income for more information.

If you've missed the 60-day deadline, you may still be able to complete a rollover by self-certifying that you qualify for a waiver of the 60-day requirement. For details, see Revenue Procedures 2016-47PDF and 2020-46PDF.

The 60-day period may be postponed if you were affected by a federally declared disaster, or by a significant fire for which assistance is provided under the Robert T. Stafford Disaster Relief and Emergency Assistance Act after November 15, 2021. Also, if you took a qualified disaster distribution from a retirement plan and want to repay it, generally, you have 3 years to do so.

Withholding

Any taxable eligible rollover distribution paid to you from an employer-sponsored retirement plan is subject to a mandatory income tax withholding of 20%, even if you intend to roll it over later. If you do roll it over and want to defer tax on the entire taxable portion, you'll have to add funds from other sources equal to the amount withheld. You can choose instead a direct rollover, in which you have the payer transfer a distribution directly to another eligible retirement plan (including an IRA). The 20% mandatory withholding doesn't apply in a direct rollover.

Additional Taxes

If you're under age 59½ at the time of the distribution, any taxable portion not rolled over may be subject to a 10% additional tax on early distributions unless an exception applies. For a list of exceptions, refer to Topic No. 558 and Topic No. 559. Certain distributions from a SIMPLE IRA will be subject to an additional 25% tax instead of the additional 10% tax. For more information on SIMPLE IRAs, refer to Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

Additional Information

For further information about rollovers and transfers, refer to Publication 575, Pension and Annuity Income and visit Do I Need to Report the Transfer or Rollover of an IRA or Retirement Plan on My Tax Return?