How and When to Use a Direct Rollover

Übersicht: 

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 investor changing jobs or leaving the workforce may utilize either a Direct Rollover election to continue their retirement savings outside of their employer-sponsored retirement plan.   Assets distributed directly to your IRA from the retirement plan may qualify as a Direct Rollover.

What is a Direct Rollover?

The Direct Rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan, including an IRA.  The contribution to the IRA is called a rollover contribution.  The Direct Rollover method transfers the assets directly from the retirement plan (and not to the IRA owner) into the investor's IRA, avoiding the 20% mandatory IRS withholding.  This option to transfer retirement assets has no age limitations.

Eligible retirement plans include:

  • Employer's qualified pension, profit -sharing, or stock bonus plan
  • Annuity plan
  • Tax sheltered annuity plan (section 403(b) plan)
  • Governmental deferred compensation plan (section 457 plan)

Who do you contact first? 

Contact your retirement plan administrator or the human resources office for eligibility and requirements.  The plan administrator is required to provide a reasonable direct method of asset transfer.   Completion of an IRA Rollover Form provided by the administrator may be required, in some cases.  In other cases, the plan accepts an IRA Rollover Form supplied by your IRA's broker.  Therefore, it is important to check with the plan administrator.

Initiating your Direct Rollover through IB 

For those transfers that require a broker-supplied IRA Rollover Form, Interactive Brokers provides a convenient IRA Rollover Form.  Interactive Brokers will forward the request to the plan administrator or broker for processing.  Funds may be transferred by either wire transfer or check directly to Interactive Brokers.

Before accepting an IRA rollover transaction into an 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 Rollover Form and an IRA Rollover Certification Form.

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 on the form.

Contact Customer Service with any additional questions.

 

 

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this article was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Determining the IB entity in which an account is maintained

Übersicht: 

All applicants are required to specify their country of legal residency during the initial stage of the application process. Based upon the response provided, the applicant will automatically be provided with the appropriate application forms, agreements and disclosures specific to the IB entity through which the account will be maintained upon approval (e.g., IB LLC, IB Canada, IB UK, IB India, IB Japan).  

It's important to note that the IB entity to which an account is assigned is not subject to client discretion but rather determined by regulation and is a function of an individual's stated country of legal residency or, in the case of an entity, its country of formation.

Trading Access to the Indian Financial Markets for non-residents

Per Indian regulations, trading access to the Indian financial markets for individuals residing outside India is currently restricted to "Non-Resident Indians" ("NRIs") and "Financial Institution Intermediaries" ("FIIs") only.

NRI

NRIs are defined in the Indian Foreign Exchange Management Act of 1999 and the Indian Foreign Exchange Management Deposit Regulations of 2000.

In short, to qualify for NRI status you must:

a. Reside outside of India for more than 182 days per year, and;

b. Hold Indian citizenship, or;

c. Be a Person of Indian Origin as defined in the Indian Foreign Exchange Management Deposit Regulations of 2000.

 

Please note that applicants must satisfy criteria (a) and criteria (b) or (c) and will be prompted to review the aforementioned legislation and confirm their status at the point of application.  To trade Indian products as a NRI, new or existing customers may apply for an account through the IB website.

FII
Currently not supported.

Can I withdraw funds from my account once I've met the minimum deposit requirement?

IB's intent with respect to the minimum is for account holders to maintain at least USD 10,000, or equivalent, although it's understood and accepted that equity may fall below that level due to trading losses and/or fees. Account holders are not, however, allowed to fund an account at a level sufficient to meet the minimum threshold and subsequently withdraw funds in an effort to circumvent the minimum.

What is the minimum applicant age requirement?

In the case of an account requesting 'Cash' trading permissions the minimum age requirement is 18 (for joint accounts, both parties must be at least 18 years of age).

In the case of an account requesting 'Margin' trading permissions the minimum age requirement is 21 (for joint accounts, the primary account holder, at a minimum must be at least 21 years of age.  The secondary joint account owner must be at least 18 years of age).

 

Account Application - General FAQs

Background: 

 

How do I find out about the status of my account application?
Once all account application materials have been received at IB, the application will be reviewed and a decision will be made to either accept or decline the account. An e-mail will be sent to the applicant informing them of the decision. In addition, you may log into Complete Application to view your latest status.
 
Can I fund an account in a different currency than the base currency?
Yes, you can deposit and withdraw funds in any of the offered currencies if you have a margin account. Cash accounts may only fund in the base currency.
 
Will you convert funds from one currency to another?
No, IB does not convert funds but IB customers may convert currencies through the IB Forex trading venues (IdealPro for orders above USD 25,000 or equivalent and the odd lot order book for orders below that threshold).
 
Can I transfer money between different IB accounts?
Yes. In the case of Individual accounts, funds may be transferred between accounts having the identical name, type and Tax ID,  Certain transfers may also be allowed between a master account and a client or sub account. See IB's Transfers page for instructions and details.
 
Is my account insured?
Cash in the securities portion of your account deposited for purchase of securities is insured for up to $30 million regardless of your country of residency. Click here for specifics on your insurance protection. As part of the IB Universal Account service, IB is authorized to automatically transfer funds as necessary between your IB securities account and your IB futures account in order to satisfy margin requirements in either account. You can configure how you want IB to handle the transfer of excess funds between accounts on the Excess Funds Sweep page in Account Management: you can choose to sweep funds to the securities account, to the futures account, or you can choose to not sweep excess funds at all.

 

Does IB offer managed accounts?

 

IB, itself, does not provide advisory services to customers, but we do clear for a rather large number of Financial Advisors who do carry and clear their customer accounts with IB.  As we are not in a position to provide personal recommendations as to Financial Advisors, you would need to research for an advisor on your own and if they are not already affiliated with IB, request that they open an account on your behalf with IB. 

 

You may also wish to  review the website of a US industry regulator such as FINRA (www.finra.org) which provides information regarding selecting investment professionals  along with  a tool referred to as FINRA BrokerCheck which allows investors to check the professional background of individual brokers.

Can I open a paper trading account for practice purposes before opening a live account?

 

IB does offer a paper trading account which allows one to use the full range of IB trading facilities in a simulated environment using real market conditions.  This account, however, is made available only after the regular trading account has been approved and funded. Until that time, we recommend that you try the online demos made available to prospective customers through our website to get an overview of system functionality.   A demo of both the TraderWorkstation or WebTrader trading platforms may be found by visiting our website at www.interactivebrokers.com and selecting the Individuals page.  There you will be presented with a series of links including one titled 'Demos'.

IRA: Understanding Rollovers

Interactive Brokers offers three IRA account types for U.S. persons:  Traditional IRA, Roth IRA, and Simplified Employee Pension plan IRA (a.k.a. SEP-IRA).  Rollover transaction options may be available into or out of each account type.

The term IRA Rollover refers to several different movements of funds between U.S. retirement accounts.  Select from the list below for a brief description of each rollover type available, as well as the their guidelines.

 

IRA to IRA Rollover

Direct Rollover

IRA to Employer Sponsored Retirement Plan Rollover

12-Month Rule

60-Day Period

 

Rollover Types

1. IRA to IRA Rollover

Funds withdrawn from an IRA and re-deposited into an IRA within 60 days may be eligible for treatment as a 60-day rollover contribution.  If eligible, this movement of funds may qualify as an IRA withdrawal of funds without any penalty or taxes.   

Tax Reporting - Principal Trust will report the withdrawal of funds as an IRA distribution and the re-deposit of funds as an IRA rollover contribution to the IRS.   The IRS receives Form 5498 (IRA Contributions) and Form 1099-R (IRA Distributions).  US investors do not include the Form 5498 with their tax filing, but do include the 1099-R.  Click 2012 Tax Reporting for details.

2. Direct Rollover

Funds received or withdrawn from an employer-sponsored retirement plan and deposited directly into an IRA.  The 20% tax withholding of funds by the plan sponsor is waived when funds are rolled directly into an IRA. 

Tax Reporting - Principal Trust will report the deposit of funds from an employer-sponsored retirement plan as an IRA rollover contribution to the IRS.  The IRS receives Form 5498 (IRA Contributions).   US investors do not include the Form 5498 with their tax filing.  Click 2012 Tax Reporting for details.

3. IRA to Employer Sponsored Retirement Plan Rollover

Funds moved directly from an IRA into an employer's retirement plan are deemed rollover contributions.  Not all retirement plans accept rollovers from IRAs.  Investors should consult the plan sponsor to determine eligibility.

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Limitations & Guidelines 

12-Month Rule

Distributed funds from an IRA may be rolled into another IRA only once every 12-month period.  The rule applies to funds withdrawn from each separate IRA.  The 12-month period begins the date funds are received, not on the date funds are deposited into another IRA. (See IRS Publication 590 for limited exceptions to the rule.)

60-Day Period

Distributions from an IRA or Employer Sponsored Retirement plan may remain eligible for the tax-free rollover treatment only when contributed to another qualified plan within 60 days of receipt.  Generally, funds re-deposited outside of 60 days are not tax-free.  The withdrawal of funds is taxable. The deposit into another IRA is treated as a regular contribution.  (See IRS Publication 590 for limited exceptions to the rule.)

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Click here to return to the Retirement Account Resource page.

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 q

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