What Is a Direct Rollover?

It's generally non-taxable.

A direct rollover is tax reportable, so you will receive tax documents related to this event.

What should I know about withholdings?

If any amount from the rollover was withheld for taxes or converted to a Roth IRA, this amount could be subject to taxes and possible early withdrawal penalties. For example, if any eligible rollover amount is payable to you, the retirement plan is required to withhold 20%. The amount withheld could be subject to taxes and penalties (if you’re under age 59 ½). Additionally, if you are age 73 or older, any required minimum distributions (RMD) are not eligible for rollover.

A direct rollover to an existing fund within your IRA does not have a minimum investment requirement. If the incoming assets are rolled into a new IRA or a new fund within an existing IRA, a minimum requirement of $1,000 or $500 with a minimum automatic investment of $50 per month will apply.

Janus Henderson does not charge a fee to accept or process an inbound direct rollover. Ask if your employer’s plan charges fees.

We're here to help.

At Janus Henderson we have direct rollover specialists that can assist you every step of the way. However, your authorization is required by your employer's plan - typically in writing and in some cases by telephone.

Step-by-step instructions

The first step is to create the right IRA for you or have the proceeds deposited into your existing Janus Henderson IRA. And then we will need your allocation instructions to determine which funds you would like to own. The next step is to contact your employer's plan administrator and fulfill their requirements to move the assets. Once your authorization is complete, the employer's plan will send us your anticipated rollover assets.

The Roth exception

Any amounts in your employer's plan that consist of designated Roth assets can only be rolled over into a Roth IRA. However, traditional employer plan assets can be rolled over into either an IRA or Roth IRA. If you're moving traditional assets into a Roth IRA, the rollover amount is taxable as a Roth IRA conversion. If all the pre-tax assets are rolled over into an IRA, the rollover amount is not taxable.

Don't forget: Required minimum distributions.

Required minimum distributions, which are mandatory beyond age 73, are not eligible for rollover.

Inherited IRAs

It is also possible to rollover a spouse's or relative's employer's plan into an IRA. For a non-spouse beneficiary, the rollover option can only move into an inherited IRA or inherited Roth IRA. A spouse beneficiary is allowed more flexibility in that they can rollover the assets into their own IRA.

Read the fine print.

Your employer's plan may require you to have received and read the Special Tax Notice under section 402(f) to ensure you understand all your options and tax consequences of a direct rollover.