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April 15, 2009

Rollover Eligible

Your Guide

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Definition

Another name for eligible rollover distribution (ERD), which is used in reference to a distribution that is eligible to be rolled over to an eligible retirement plan. Eligible rollover distributions include a participant’s balance in a qualified plan, 403(b) or 457(b) plan, except for certain amounts that include the following:
  • Any of a series of substantially equal distributions paid at least once a year over:
    1. The participant’s  lifetime or life expectancy,
    2. The joint lives or life expectancies of the participant and his/her beneficiary, or
    3. A period of 10 years or more,

A required minimum distribution, hardship distributions, corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains.  
A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant’s accrued benefits are reduced (offset) to repay the loan dividends on employer securities, and the cost of life insurance coverage.

Referring Cite
IRC § 402(c)(2), IRC § 402(c)(4); Treas. Reg. §1.402(c)-2, Q&A-4
Additional Helpful Information
  • Eligible rollover amounts that are processed as a direct rollover are not subject to withholding tax
  • Eligible rollover amounts that are not processed as a direct rollover must generally be rolled over within 60-days: that is assuming the participant wants to rollover the amount. But see
  • Eligible rollover amounts that are not processed as a direct rollover are generally subject to a federal withholding tax of 20%. State tax withholding may also apply, depending on the State’s tax-withholding requirements

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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