New IRS Rule Eases Retirement Rollovers

Alexandria, VA March 2, 2004--A new Revenue Ruling may soon give you more say so over the funds that you rollover into your employer's retirement plan.

About 10 percent of job changers move their old 401k or similar retirement account to the plan offered by their new employer, according to industry figures. "You often lose flexibility by rolling over into an employer plan instead of rolling into IRA" says Daniel Lamaute, Retirement Plan Specialist with Lamaute Capital, Inc. "That's because many employer plans, restrict a participant's ability to take distributions from the plan prior to a specified event (i.e., retirement, death, disability or other severance from employment)" says Lamaute.

IRS Ruling 2004-12 issued last week allows retirement plans that separately account for your rollover contributions to distribute, at any time, amounts attributable to your rollover, pursuant to your request. "That means that even though your employer's 401k plan might prohibit participant distributions prior to separation from service, if you are not satisfied with your employer's plan you may request to cash out, to transfer to an IRA or to a one-person 401k plan, any amounts attributable to your rollover contributions", says Lamaute.

Distributions of retirement funds from rollover contributions remain subject to required minimum distribution rules, and other tax rules.





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