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Rev. date: 13/19/2014

Rollovers from Retirement Plans

Tax Topic 413
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 is not taxable but it is reportable on your federal tax return. Certain distributions from an eligible retirement plan cannot be rolled over, including:
  1. The nontaxable part of a distribution, such as your after-tax contributions to a retirement plan (in certain situations after-tax contributions can be rolled over),
  2. A distribution that is 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,
  5. Dividends paid on employer securities, or
  6. The cost of life insurance coverage.
Other exclusions exist for certain loans and corrective distributions.
You must include in income in the year of the distribution the taxable amount of a distribution that you do not roll over.
If the plan pays an eligible rollover distribution to you, you have 60 days from the date you receive it to roll it over to another eligible retirement plan. Any taxable eligible rollover distribution paid from an employer-sponsored retirement plan to you 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 will have to add funds from other sources equal to the amount withheld. You can choose instead to have the payer transfer a distribution directly to another eligible retirement plan (including an IRA). The 20% mandatory withholding does not apply in a direct rollover.
If you are 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 Tax Topic 558. Certain distributions from a SIMPLE IRA will be subject to a 25% additional tax instead of the 10% additional tax. For more information on SIMPLE IRAs, refer to Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).
For further information about rollovers and transfers, refer to Publication 575, Pension and Annuity Income.