Do I Endorse a 401k Rollover Check?
Get clear guidance on whether to endorse your 401k rollover check and how to correctly transfer your retirement funds.
A 401(k) rollover allows individuals to move retirement savings from a former employer’s plan to a new retirement account, such as an Individual Retirement Arrangement (IRA) or a new employer’s plan. This process often involves receiving a physical check. Handling this check correctly, particularly regarding endorsement, can be confusing. This article provides guidance on managing a 401(k) rollover check for a smooth transition of your retirement assets.
Understanding Your Rollover Check
When you initiate a 401(k) rollover, the check you receive will typically fall into one of two categories. A direct rollover check, often referred to as a trustee-to-trustee transfer, is made payable directly to your new financial institution for your benefit. For example, the check might be addressed to “XYZ Brokerage FBO [Your Name],” indicating the funds are intended for your account at that specific custodian. This method is generally preferred as it simplifies the process and avoids potential tax implications.
The alternative is an indirect rollover check, issued directly to you, the individual plan participant. This check will be made payable in your name, such as “Jane Doe.” Receiving an indirect rollover check triggers a 60-day window for you to redeposit the funds into another qualified retirement account. Identifying the exact payee listed on the check is the first step, as this detail determines all subsequent actions regarding endorsement and submission.
Endorsing the Rollover Check
Endorsing your 401(k) rollover check depends on how it is made payable. If you receive a direct rollover check, made out to your new financial institution for your benefit, you should not endorse it. This type of check is already legally designated for the new custodian, and adding your signature is unnecessary and can complicate processing.
Conversely, if your rollover check is an indirect rollover, made payable directly to you, endorsement is required. To properly endorse this check, sign your name on the back, exactly as it appears on the payee line on the front. For added security, include “For Deposit Only” along with the new account number or “For Deposit Only to [New Custodian Name]” below your signature. Your endorsement allows your bank or the new custodian to process the funds into your designated retirement account.
Submitting Your Rollover Check
Once you have identified the type of rollover check and completed any necessary endorsement, submit the check to your new retirement account custodian. This new custodian will typically be a brokerage firm or a bank where your new Individual Retirement Arrangement (IRA) or other qualified plan is established. Send the check directly to this institution, not to your personal bank account.
Common methods for submitting the check include mailing it via a secure, trackable service, such as certified mail. Some financial institutions may also allow for in-person submission at a local branch. The check must be accompanied by any required rollover instruction forms provided by the new custodian. These forms typically specify how the funds should be allocated within your new account, such as to a Traditional IRA or a Roth IRA. Before submitting, always make a copy of both the front and back of the check, as well as any accompanying forms, for your personal records.
Post-Submission Actions
After submitting your rollover check, monitoring its delivery and processing is an important final step. If you mailed the check using a trackable service, regularly check the tracking status to confirm its arrival at the new custodian. Upon delivery, contact your new financial institution to confirm they have received the check and initiated the deposit process.
Funds typically appear in your new account within a few business days to a week after the custodian receives and processes the check, though processing times can vary. For indirect rollover checks, strict adherence to the 60-day deadline is important. The Internal Revenue Code allows 60 days from the date you receive the funds to redeposit them into a qualified retirement account; failing to meet this deadline can result in the distribution being treated as taxable income and potentially subject to a 10% early withdrawal penalty if you are under age 59½. Regularly review your new account statements to ensure the funds are correctly deposited and allocated as intended.