Confusing rollover situation

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jcsunday@bogleheads
Posts: 1
Joined: Thu Sep 14, 2017 10:40 am

Confusing rollover situation

Post by jcsunday@bogleheads » Thu Sep 14, 2017 11:17 am

Fidelity helped me figure it out. All I had to do was endorse the distribution check from the traditional 401k for deposit only to the Roth IRA, and send it back to Fidelity along with a personal check, also for deposit to the Roth IRA, for the amount of the withholding on the distribution. On both checks, I wrote 60 DRO (short for "60-day rollover") and the account number for the Roth IRA.
Last edited by jcsunday@bogleheads on Sat Sep 16, 2017 10:27 am, edited 1 time in total.

JBTX
Posts: 1298
Joined: Wed Jul 26, 2017 12:46 pm

Re: Confusing rollover situation

Post by JBTX » Thu Sep 14, 2017 1:16 pm

jcsunday@bogleheads wrote:
Thu Sep 14, 2017 11:17 am
What happened:
I received a distribution check from Fidelity for the amount that remained in my traditional 401(a) (yes, "a", not "k") from my previous employer. I did not request it, but they may have sent it because I had already rolled the rest of it (100%) into my Fidelity personal Roth IRA account as direct rollover, and this last amount was deposited by the employer after the big direct rollover was complete.

What I want to do about it:
I want to roll the amount of the entire distribuion into my Fidelity Roth IRA within 60 days (hopefully much less than 60 days).

What I think I already know, and don't need anyone to explain (unless I'm mistaken):
1. The net check amount is only $221.29 (after withholding for Federal and Arizona state tax), but I know that I must roll all $286.27 (the total distribuion) into the Roth IRA within 60 days to avoid the 10% penalty.

2. I must report all $286.27 (the total distribuion) as taxable income on my tax return at the end of this year, since I'm going to roll it all into a post-tax Roth IRA, instead of a traditional pre-tax IRA or 401(k).

My question is (please explain):
1. Since this can't be a "direct" rollover, since Fidelity alredy sent me a check, how do I show the IRS that the $286.27 I want to put into my Fidelity Roth IRA is still a rollover to the Roth IRA, and not a regular contribution to it?

2. Specifically, what paperwork or form, connects the distribution from the (old) traditional 401(a), to the deposit into my existing personal Fidelity Roth IRA? What identifies it to the IRS as a rollover?

I need to know all this because I want to avoid the 10% penalty on the distribution from the old traditional 401(a), and I also don't want the IRS to count it against my 2017 contribution limit for my existing Roth IRA. I know the amount is small, but I plan to do much larger rollovers (incremental) from the 401(k) I have with my current employer when I leave this job, so I need to learn the ropes. If you could direct me to a document, or other post to a forum, that already addresses situations like this, I would be happy to go read up on it so you don't have to work so hard to answer my questions.

Thank you.
I'm not at all an expert, mainly just bumping. As to #1 and #2, my guess would be Fidelity would report the deposit and send documentation as such. I'd recommend calling a Fidelity retirement specialist - they are usually pretty knowledgeable on such matters.

kaneohe
Posts: 4369
Joined: Mon Sep 22, 2008 12:38 pm

Re: Confusing rollover situation

Post by kaneohe » Thu Sep 14, 2017 5:02 pm

jcsunday@bogleheads wrote:
Thu Sep 14, 2017 11:17 am
...............................................
My question is (please explain):
1. Since this can't be a "direct" rollover, since Fidelity alredy sent me a check, how do I show the IRS that the $286.27 I want to put into my Fidelity Roth IRA is still a rollover to the Roth IRA, and not a regular contribution to it?

2. Specifically, what paperwork or form, connects the distribution from the (old) traditional 401(a), to the deposit into my existing personal Fidelity Roth IRA? What identifies it to the IRS as a rollover?

I need to know all this because I want to avoid the 10% penalty on the distribution from the old traditional 401(a), and I also don't want the IRS to count it against my 2017 contribution limit for my existing Roth IRA. .............................
Thank you.

2nd the suggestion to ask Fidelity because they may have their own way of doing things but my guess is something like:
1) When you opened the Roth originally, Fidelity probably wanted to know if the funds were a transfer, original contribution, or rollover
(see PenFed form in the1st link here https://www.google.com/search?source=hp ... 3fkovVFoB4

I would think additions to an existing Roth would require the same info...........either on a Fidelity form or some document that you create telling them what the funds are and what to do with it..........thus the document that accompanies the check is what IDs it as a rollover with the other document from 401a as verification and the < 60 day timeframe. Fidelity, in turn, should provide a statement with that same info.

This issue seems to be similar to making an IRA contribution in Feb of yr xxxx. How does the broker know whether it is a yr xxxx contribution
or a yr xxxx-1 contribution. It doesn't. You tell them and hope their document matches your wishes.....sometimes it doesn't so you need to check.

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