Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: Must a qualified plan give the participant the option to send an eligible rollover distribution directly to an IRA custodian?

Answer: Yes.

Here’s an excerpt from Treasury Regulations § 1.401(a)(31)-1:

(S)ection 401(a)(31) requires qualified plans to provide distributees the option to make a direct rollover of their eligible rollover distributions to an eligible retirement plan.

The direct rollover of a distribution will permit the taxpayer to avoid the inconvenient mandatory 20% income tax withholding on the distribution.

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