401k Admin Requiring IRS Opinion Letter to Roll In Money

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Thrifty Femme
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401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Thrifty Femme » Thu Jun 15, 2017 9:07 pm

The summary plan description for my 401k says rollover are allowed and the brokerage said to fill out the application and mail it in with the FBO check. My benefits people say I need an IRS Opinion letter from the plan that the money is coming from. The problem is the money is coming from a rollover IRA not a 401k plan. Apparently the real 401k admin is no longer with my company, and this benefits person said any money that is rolled into my company's 401k plan must have an Opinion letter.

ETA: [I have rolled over three 401ks from previous employers into a single rollover IRA at Vanguard.]

Does this mean I need to get opinion letters from all the 401k plans that I rolled over into my IRA? Are there any 401k admins on here that can provide some advice?
Last edited by Thrifty Femme on Fri Jun 16, 2017 9:15 pm, edited 2 times in total.

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LadyGeek
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by LadyGeek » Fri Jun 16, 2017 7:33 pm

I don't have the background to answer your question, but your post is a bit unclear. Are you rolling a traditional IRA into your employer's 401(k) plan, and your employer is asking for an Opinion letter?

Is your second paragraph asking if you need opinion letters for rolling a 401k plan into your traditional IRA? If so, the answer is no. (This is very common. I've never heard of an opinion letter before, so I assume it's not needed.)

IRS background info: What is a favorable determination letter?

Also: What Is a Letter of Determination for a 401(k)?, from The Motley Fool.


Update: Incorrect reference, see below.
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Thrifty Femme
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Thrifty Femme » Fri Jun 16, 2017 8:57 pm

LadyGeek wrote:I don't have the background to answer your question, but your post is a bit unclear. Are you rolling a traditional IRA into your employer's 401(k) plan, and your employer is asking for an Opinion letter?

Is your second paragraph asking if you need opinion letters for rolling a 401k plan into your traditional IRA? If so, the answer is no. (This is very common. I've never heard of an opinion letter before, so I assume it's not needed.)

IRS background info: What is a favorable determination letter?

Also: What Is a Letter of Determination for a 401(k)?, from The Motley Fool.
Yes, I want to roll my traditional IRA into my employer's 401(k) plan, which is supposedly allowed; however, they want an Opinion letter which is somehow different than a determination letter. I've read both of those links. The IRS link is for employers, and the Motley Fool link is for determination letters. This site says only the pre-approved plan sponsor can apply for an Opinion letter, but that site is from 2011.

Regarding my second paragraph I have rolled over three 401ks from previous employers into a single rollover IRA at Vanguard. IRAs aren't plans, so I guess my only option would be to contact all of my previous employers and ask for opinion letters on their 401k plans. Apparently my company doesn't have an experienced 401k administrator right now, so I'm hoping there is someone knowledgeable here that can help me. I'll update the original post.

123
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by 123 » Fri Jun 16, 2017 9:45 pm

You might want to request a complete copy of the 401k plan document from your employer. There may be details in there about the ability/conditions of the plan to receive rollover money. Requesting a copy of the actual plan document will likely get you a lot more credibility with your employer (or they'll think you're a trouble-maker). Hardly anyone ever requests a copy of the actual plan document and it's quite possible that your benefits person has never seen/read it.

The requirements of IRS Opinion Letter to be submitted seems strange to me as well. Maybe the benefits person is just tossing that out as a roadblock.
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Alan S. » Fri Jun 16, 2017 10:36 pm

The main concern of a 401k plan is that they do not receive IRA basis in a rollover, and the IRS has issued RR 2014-9 https://www.irs.gov/irb/2014-17_IRB/ar05.html to make it easier for plans to assume that risk.

But if a plan is concerned that your rollover IRA may hold rollover funds that were not even qualified money to begin with, they are making IRA rollovers into a real hassle. It may be difficult to determine if the plan actually contains this restriction or whether someone is just misinterpreting the situation, so 123 may be correct about this plan.

As your IRA custodian, Vanguard cannot determine if all of these 401k plans were qualified, but they could certify that your rollover IRA has only been funded by direct rollovers from employer plans. I recall someone with a similar problem stating that Vanguard was not willing to issue any such certification.

It could be a major undertaking to jump through all these hoops with no guarantee of success in the end, so I guess it becomes of case of how badly you want to do this IRA rollover. You should also consider the other aspects of your 401k plan, such as the offerings and expenses these funds would be subject to, what the distribution options for this rollover money are from the plan should you work there a long time, etc.

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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Thrifty Femme » Sat Jun 17, 2017 8:57 am

123 wrote:You might want to request a complete copy of the 401k plan document from your employer. There may be details in there about the ability/conditions of the plan to receive rollover money. Requesting a copy of the actual plan document will likely get you a lot more credibility with your employer (or they'll think you're a trouble-maker). Hardly anyone ever requests a copy of the actual plan document and it's quite possible that your benefits person has never seen/read it.

The requirements of IRS Opinion Letter to be submitted seems strange to me as well. Maybe the benefits person is just tossing that out as a roadblock.
Thank you for your comments. The complete copy is different from the summary plan description, correct? I have the SPD.

It says the following

Code: Select all

If you participated in another retirement plan, you may roll over any distribution you receive from the other plan to this Plan if all legal requirements (and any requirements imposed by the Administrator) on such rollovers are satisfied. If you do decide to make a rollover contribution and it is accepted by the Administrator, it will be kept in a separate Rollover Account established on your behalf. Your Vested Interest in your Rollover contributions will be 100% at all times.
Specifically, if you are an eligible employee, you may roll over amounts from the following retirement plans:
(1) qualified plans excluding after-tax contributions
(2) 403(a) and 403(b) annuity plans excluding after-tax contributions
(3) governmental plans (Code Sec. 457(b) plans)
(4) Roth 401(k) Contributions made to any plan described above
(5) Individual Retirement Accounts (IRAs) and individual retirement annuities
Alan S. wrote:The main concern of a 401k plan is that they do not receive IRA basis in a rollover, and the IRS has issued RR 2014-9 https://www.irs.gov/irb/2014-17_IRB/ar05.html to make it easier for plans to assume that risk.

But if a plan is concerned that your rollover IRA may hold rollover funds that were not even qualified money to begin with, they are making IRA rollovers into a real hassle. It may be difficult to determine if the plan actually contains this restriction or whether someone is just misinterpreting the situation, so 123 may be correct about this plan.

As your IRA custodian, Vanguard cannot determine if all of these 401k plans were qualified, but they could certify that your rollover IRA has only been funded by direct rollovers from employer plans. I recall someone with a similar problem stating that Vanguard was not willing to issue any such certification.

It could be a major undertaking to jump through all these hoops with no guarantee of success in the end, so I guess it becomes of case of how badly you want to do this IRA rollover. You should also consider the other aspects of your 401k plan, such as the offerings and expenses these funds would be subject to, what the distribution options for this rollover money are from the plan should you work there a long time, etc.
Thank you for the link. I will pass it along. This is really irritating because I'm close to needing to do backdoor roth contributions, and this 401k plan has excellent offering and expenses.

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Thrifty Femme
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Thrifty Femme » Sun Jun 18, 2017 2:12 pm

I Googled for "certifying an IRA contains direct rollover contributions" and found this IRS page last updated this year that explains how to verify rollover contributions to employer plans. That site also references the link Alan S. provided. Hopefully this will be enough to get my employer to stop requiring opinion letters for rollovers into the plan.

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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by 123 » Sun Jun 18, 2017 7:11 pm

Thrifty Femme wrote: The complete copy is different from the summary plan description, correct? I have the SPD.
The complete plan document will be considerably longer the n the SPD. When I requested the full plan document from one of my employers it was 50 - 60 typewritten double-spaced pages versus the 2 - 3 pages SPD. If you work for a megacorp the complete copy of the plan you get will likely be nicely printed and formatted whereas the one I received (employer has less then 500 employees) was just typewritten and had various amendments signed and dated. Some plans may have a lot of detail about rollover acceptance issues whereas others may say very little and leave it to the discretion of the 401k administrator. Regardless I found reading through the complete plan enlightening and very informative.
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Re: 401k Admin Requiring IRS Opinion Letter to Roll In Money

Post by Thrifty Femme » Tue Jun 27, 2017 5:44 pm

I have an update. I found out the new 401k admin is someone I know. He took the IRS RR information Alan S. provided and the instructions for verifying rollovers I found on the IRS website to my company's outside legal council. Opinion or determination letters are no longer required. Thanks again to all who contributed to my success :sharebeer

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