IRA: Rollover Rules & Conditions

 

This information is for general educational purposes only.  Individuals should consult with their financial adviser or legal counsel to determine how rollover regulations affect their unique situations.

Generally, an IRA rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan.  The contribution to the second retirement plan is called a rollover contribution.

This article outlines the types of IRA rollover transactions, rules and conditions, IB's Rollover Certification form, and rollover transaction details.  Select from list below for details:

Rules & Conditions

Rollover Certification

Eligible Rollover Transactions

Ineligible Transactions

  

Rules & Conditions

Prior to completing an IRA Rollover transaction, we recommend that you review the rules and conditions surrounding eligibility.  Interactive Brokers can accept as a tax-free transaction an eligible rollover distribution as defined under the Internal Revenue Code.  Included in this article is information about eligible transactions, as well as the Interactive Brokers  IRA Rollover Certification form.

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IRA Rollover Certification

Before accepting an IRA rollover transaction into an Interactive Brokers LLC IRA, we require that you review your eligibility for the rollover and certify your understanding of the rollover rules and conditions.  The IRA Rollover Form includes the IRA Rollover Certification

The Fund Transfers page within the Account Management lets you notify IB of an IRA Rollover deposit of funds into your account.  Select the Funding tab in the header link and choose Deposit Funds in the Transaction list.   In the Method list, select Direct Rollover.  Complete, sign, and return both forms to the Interactive Brokers address listed on the form.

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Rollover Transactions

Two types of IRA rollover transactions exist with different guidelines and delivery methods:

  1. Direct Rollover - a transfer of assets from an employer-sponsored retirement plan directly to an eligible IRA.  If you choose to receive the distribution first, then you may roll over the funds to the IRA within 60 days.
  2. Indirect Rollover - a distribution from an IRA paid to you, followed by a rollover into another IRA within 60 days.  The IRS allows an indirect rollover of each IRA's funds once during a twelve-month period.

(Note:  A distributions directly from one IRA trustee to another IRA trustee is a Trustee-to-Trustee transfer.  It is not affected by the twelve-month waiting period.)

For additional information about rollovers, visit Understanding Rollovers.  See also IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) for more specific guidelines on moving retirement plan assets.

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Eligible Rollover Transactions

Almost any distribution from a qualified plan can be rolled over to an IRA.  Your retirement account may be eligible for one of the following eligible rollover transactions.

Traditional IRA or SIMPLE IRA to Traditional IRA Rollover

  • Funds or property deposited less than 60 days of receipt by the IRA owner from the previous IRA
  • During the preceding 12 months, no other distributions from the distributing IRA were rolled over
  • The assets involved in the transaction have not been rolled over in the past 12 months
  • Required Minimum Distribution satisfied (if over 70 1/2)
  • For SIMPLE IRAs, after two years from the first contribution

Roth IRA to Roth IRA Rollover

  • Funds or property deposited less than 60 days of receipt by the IRA owner from the previous IRA
  • During the preceding 12 months, no other distributions from the distributing IRA were rolled over
  • The assets involved in the transaction have not been rolled over in the past 12 months

Rollover or Direct Rollover from Qualified Plan into a Traditional IRA

  • Eligible participant (participant, spouse beneficiary, or former spouse due to divorce)
  • Funds or property deposited less than 60 days of receipt by the participant from the previous plan
  • Funds received from an eligible qualified retirement plan
  • Required Minimum Distribution satisfied (if over 70 1/2)
  • Consists of funds, property, or proceeds from the sale of property distributed from the qualified plan
  • All of the funds are eligible to be rolled over

Roth IRA to Roth IRA Rollover

  • Funds or property deposited less than 60 days of receipt by the IRA owner from the previous IRA
  • Required Minimum Distribution satisfied (if over 70 1/2)

Ineligible Rollover Transactions

Some funds distributed from a retirement plan are not eligible for rollover into an IRA.  The following transactions are not eligible rollover transactions.

  • Any portion of a distribution from a retirement plan not rolled over
  • Required Minimum Distributions
  • Distribution of excess contributions and related earnings
  • Retirement plan loan treated as a distribution
  • Hardship distributions
  • Distributions part of substantially equal payments (72-t)
  • Dividends on employer securities
  • Non-spousal death benefit distributions
  • The cost of life insurance coverage

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Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.