One-Rollover-per-Year Rule Question

by **GGecko** » Mon Aug 23, 2010 9:08 am

I have a client that has a large 401k through the Railroad system. He wants to put 1/2 into an annuity and the other half into a managed account. 2 questions: Does this violate the 1 rollover per year rule, even if the checks are made directly to the new institution, FBO.... Also, could his Plan document dictate the rule on this? Is there any way to split an IRA rollover into 2 different custodians?

by **Bradly T.** » Mon Aug 23, 2010 9:29 am

Don't believe the restriction is enforced at IRA rollover level but others will know more. However, just for efficiency sake, we always do a single rollover to a cash IRA (brokerage or directly held MM fund) and then do custodial IRA transfers to multiple accounts. This simplifies transaction and 1099 reporting for plan trustee and there are no restrictions on transfers.

Is that an "in-service" rule??

by **GGecko** » Mon Aug 23, 2010 9:43 am

No in-service.... he is 62 and fully retired.

by **Bradly T.** » Mon Aug 23, 2010 12:07 pm

Good...because i think the one-rollover-per-year rule is into or out of an "in-service" employee's account; not seperated from service. Still, we always recommend cash IRA rollover, especially if dividing to more than one custodial account. We perform rollover first with no portfolio/product decision required. Seperate the decisions...#1 is roll or not roll - while rollover is progressing, then agreement is reached on account and asset allocations and paperwork completed.

I've seen many well formulated planning recommendations come apart because too many decisions are required at same time, it can unnerve some and cause process seizures for ALL recommendations over one particular detail. Move clients from decision to decision and action to action one at a time through a patient, measured process. Clients look kind of surprised when I ask them "what's the rush? this deserves due consideration, planning, and patience, doesn't it? first things first!"