A rollover occurs when you take a tax-free distribution of cash or other assets from
one qualified employer retirement plan and contribute all or part of it to another
qualified retirement plan. You can roll over most distributions except:
- The nontaxable part of a distribution, such as your after tax contributions to a
- A required minimum distribution; or
- A distribution that is one of a series of payments based on life expectancy or paid over
a period of ten years or more.
Any taxable amount that is not rolled over must be included as income in the year you
If the distribution is paid to you, you have 60 days to roll it over. Any taxable
distribution paid to you is subject to a mandatory withholding of 20%, even if you intend
to later roll it over. If you do later roll it over and want to defer tax on the entire
taxable portion, you will have to add funds from other sources equal to the amount
withheld. You can choose to have your employer transfer a distribution directly to another
eligible plan or to an IRA. Under this option, taxes are not withheld.
If you are under age 59 ½ at the time of the distribution, any taxable portion not
rolled over may be subject to a 10% additional tax on early distributions.
For further information about rollovers and transfers, order Publication
575 by calling 1-800-829-3676.
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