You may have a few retirement savings accounts from prior employers, personal IRA accounts, or both. By “rolling over” your old retirement accounts into your new Guideline 401(k), your retirement savings benefit from Guideline’s professional portfolio management and low fees.
You can rollover your assets through either a direct or an indirect rollover. Once you understand the differences between the two methods, you’ll be ready to move forward with consolidating your assets into your Guideline 401(k).
Always Opt for a Direct Rollover
With a direct rollover, your previous provider disburses your assets by making them payable directly to your new custodian for your benefit. Transferring your assets directly to your new custodian ensures that you don’t run into any dicey situations involving tax withholding or early withdrawal penalties. A direct rollover is the easiest — and the method Guideline advocates!
Beware common tax pitfalls of indirect rollovers
An alternative rollover method is an indirect rollover. With an indirect rollover, your previous custodian disburses your assets by making them payable directly to you, and withholds a mandatory 20% income tax (and potentially state tax too). You are responsible for depositing the entire amount into your new retirement account within 60 days. This includes contributing not just the full amount of the check you received, but also an amount equal to the taxes withheld from your distribution. (When you file your tax return, the 20% withheld can be applied to your income tax or returned as a tax refund to you.) If the full amount is not deposited within 60 days, this is considered a partial rollover and any amount not rolled over will be taxable and may be subject to early withdrawal penalties if you are not otherwise eligible for a distribution.
Why might someone want to go through this cumbersome process? Some people use it as a way to get a 60-day “loan” on their retirement assets. Guideline does not recommend this strategy given the added complexity and frequent oversights by participants who fail to re-deposit their entire rollover amount.
Conveniently Rollover Your Assets to Guideline 401(k)
Guideline happily accepts rollovers from the following types of accounts:
- Traditional (Pre-Tax) 401(k)
- Roth 401(k)
- Traditional IRA
- Simple IRA (subject to a 2-year waiting period)
- 403(b) (Traditional and Roth)
- Governmental 457(b) (Traditional and Roth)
Unfortunately, Roth IRAs are not permitted to be rolled into a 401(k).
Check out this IRS Rollover Chart to learn more.
- Simply report your rollover from your Guideline account. From there, you will find your Guideline account information needed to initiate a direct rollover from your previous custodian or brokerage.
- Request rollover instructions directly from the institution from which you are rolling over your account. Guideline will, if needed, provide a letter of acceptance verifying that you have a qualified plan account at Guideline which is able to accept rollovers.
- Once you have successfully requested a rollover, the institution will typically mail a check directly to you or to the custodian. We recommend having the check sent to you to ensure that it contains all the correct account information.Forward the check to your Guideline 401(k) Plan custodian, Benefit Trust Company, using the following address: Benefit Trust Company, PO Box 12765, Overland Park, KS 66282.
- You will receive an IRS Form 1099-R by January 31 following your distribution. Use the 1099-R to report your rollover on your tax return even though the distribution is not taxable. Learn more about the tax treatment of rollovers here.
Tips to prevent loss or delay of your rollover check:
- Payable Line: Don’t make the mistake of having the check made out to Guideline, or the custodian will not be able to deposit your check. Make the payable line: Benefit Trust Company for GDL
- Memo Line: Include your Guideline account number and your first and last name in the memo line: FBO XXXXXXXX First Name Last Name
- Rollover checks should be sent via a trackable method, such as Priority Mail, Certified Mail, FedEx, UPS, DHL, or a similar method.
- Do not send your check directly to Guideline’s business address. Rollover checks should be sent to the custodian to ensure timely processing.
- Account number: It’s important to ensure you provide the correct Guideline account number and mailing address to the transferring institution. You can find your Guideline account number on your dashboard in the top right hand corner by clicking on your name and reviewing the string of numbers and letters at the bottom of the drop-down. (If you receive a check missing this information, simply write it on the memo line before forwarding it to Guideline)