How to Transfer From One 401k to Another

A 401(k) to 401(k) transfer, or rollover, is the process of moving retirement savings from a former employer’s plan to a new one. The primary purpose is to consolidate retirement assets, which simplifies account management and provides a clearer picture of your overall portfolio. Moving funds to another qualified retirement plan maintains their tax-deferred status.

Determining Your Transfer Options

When moving funds from a previous employer’s 401(k), you have two methods: a direct or an indirect rollover. A direct rollover is the most straightforward approach, where the administrator of your old 401(k) plan sends the funds directly to your new plan. This is done via electronic transfer or a check made payable to the new plan’s custodian, which prevents potential tax complications.

An indirect rollover is more complex. Your old plan administrator sends a check made out directly to you, and you have 60 days to deposit the entire distribution into your new 401(k). Failing to meet this 60-day deadline will result in the IRS treating the amount as a taxable distribution. If you are under age 59 ½, the distribution could also be subject to a 10% early withdrawal penalty on top of ordinary income taxes.

With an indirect rollover, your former plan administrator is required to withhold 20% of your distribution for federal income tax. For example, on a $50,000 rollover, you will receive a check for $40,000. To complete a tax-free rollover, you must deposit the full $50,000 into the new account within 60 days, which means contributing the withheld $10,000 from personal funds. This withheld amount can be reclaimed when you file your annual tax return.

Information and Documents Needed for the Transfer

To ensure a smooth process, you will need to gather specific information and complete a rollover distribution form from your old 401(k) plan administrator. This form is usually available on the administrator’s online portal or by calling them. You will need the following details to complete the paperwork:

• Your old 401(k) account number and the plan administrator’s contact information.
• Your new 401(k) plan name and account number.
• The correct mailing address for the new plan to receive rollover checks.
• Any specific instructions from the new plan, such as a “letter of acceptance” confirming it will receive the funds.

The Step-by-Step Transfer Process

First, contact your new 401(k) plan administrator to confirm that the plan accepts rollovers from other 401(k)s, as not all plans are required to do so. During this communication, verify the precise instructions for the rollover, including how the check should be made payable and the correct mailing address.

Next, submit the completed rollover distribution form to your old 401(k) plan administrator. Depending on the administrator’s procedures, you may be able to submit this form online, by mail, or via fax. Some plans may require a notarized signature or spousal consent, so follow their specific submission rules.

After submitting the request, the old plan administrator will process the distribution, which can take from a few days to several weeks. They will then either wire the funds or mail a check to your new plan’s custodian. Once the transaction is complete, log in to your new 401(k) account to verify that the funds have been received and deposited correctly.

Post-Transfer Tax Reporting

After you complete a rollover, you will receive tax forms documenting the transaction for the IRS. Your old plan administrator will send Form 1099-R, which reports the total distribution. For a properly executed direct rollover, Box 2a (taxable amount) should be zero or blank, and Box 7 should contain the distribution code “G,” which signifies a direct rollover. Your new plan administrator may also send Form 5498, which shows the amount received as a rollover contribution. Keep these forms with your tax records.