My wife is a stay-at-home mom now but had a 401k through a previous employer. That employer contacted her and said that the 401k needs to be rolled over to someone else or distributed to us, directly.

We opted for the indirect rollover and let them know where to send the money.

Last week we got a check in the mail, for the full amount, paid to my wife. A day or two later, we got notification from the place we asked her old employer to send the money to, saying they received the funds from her former employer.

So two checks were cut -- one to us, and one to the new place. The funds hit the new place's account today so her IRA is all set over there now.

I know you have 60 days to roll over the funds until it gets treated as a 'disbursement' to yourself and all of the penalties kick in. We of course don't want that happening.

What should we do with the second check that they sent? Will the IRS know that the other company actually received the funds, and not us?

EDIT: False alarm -- updated post down below. I'm an idiot.

This message has been edited. Last edited by: Copefree,

Sounds like they really jacked it up if they actually cut two checks. I’d check with my tax person and/or financial advisor. You want to get this corrected within the 60 day window based on what I understand. Past then it’s going to get difficult to correct without penalty.

Do you have a specific account manager you deal with where the 401K money was sent to? If so I would let them handle the whole matter. They have the documentation and the proof that the funds were disbursed to them in the correct amount.

Bigger question, both you and the 401K servicer received checks in the same amount? That is one mighty screwed up situation there.

Sounds like the first place was run by the Keystone Kops. Glad your money is out of there.

quote:

Originally posted by Copefree:
Will the IRS know that the other company actually received the funds, and not us?

The IRS gets notified of transfers and rollovers by tax forms filed by the financial institutions. Sounds like your rollover was done this tax year so the original 401k administrator should provide a copy of the form early in 2019. If that turns out to incorrectly imply you got a direct transfer, at that time you'd hassle them to issue a corrected form.

quote:

What should we do with the second check that they sent?

If it were me, once I had confirmed with the intended recipient institution that they had the funds and were good to go, I'd make a copy of the duplicate check I had (for records) and shred the original.

I might also write a letter to the original 401K administrator, with a copy to the current one, just documenting the situation. That letter and a copy of the duplicate check might be useful if they mess up the tax reporting later.

I don't understand how some of these 401K companies operate. Incompetent is the understatement.

I retired in June of last year and filed my paperwork for my disbursement. Instructed for remittance of my account to go to our account manager's firm to his attention. About two weeks later I receive an envelope from the servicing company. Mailed first class, not certified or registered, you know where this is going don't you?

Yep, enclosed was the check, in my name and the new management company's name. Brilliant, they had paperwork and they still screwed it up..........

To send a check of that amount as first class with no tracking is insane but what do I know?

All I can say is it gave me an excuse to put a hundred and twenty miles on the bike that day and personally deliver the check.

OP - Did the 401(k) plan have both a traditional (pre-tax) component as well as a Roth (Post Tax) component? If so, that would require them to furnish two checks. You would have to set up two Rollover IRA accounts in that case - one Roth, and one Traditional.

If you only set up a traditional IRA, that might explain why one transferred to the new account, and one didn't.

quote:

Originally posted by shovelhead:
I don't understand how some of these 401K companies operate. Incompetent is the understatement.

I retired in June of last year and filed my paperwork for my disbursement. Instructed for remittance of my account to go to our account manager's firm to his attention. About two weeks later I receive an envelope from the servicing company. Mailed first class, not certified or registered, you know where this is going don't you?

Yep, enclosed was the check, in my name and the new management company's name. Brilliant, they had paperwork and they still screwed it up..........

To send a check of that amount as first class with no tracking is insane but what do I know?

All I can say is it gave me an excuse to put a hundred and twenty miles on the bike that day and personally deliver the check.

I find that a good number of companies are like that. They mail the check payable to you and your ira company and then you're suppose to mail the check to your ira company. I don't agree with the practice but that's what they do. I learned this because that was what i had to to after talking to the old 401k company.

quote:

Originally posted by btanchors:
OP - Did the 401(k) plan have both a traditional (pre-tax) component as well as a Roth (Post Tax) component? If so, that would require them to furnish two checks. You would have to set up two Rollover IRA accounts in that case - one Roth, and one Traditional.

If you only set up a traditional IRA, that might explain why one transferred to the new account, and one didn't.

That rings familiar with me. Similar thing happened when I asked my 401k to transfer my money to my ira company. They kept track of money in years that were over the limit and put it in a roth ira. That money came straight to me.

But it sounds like two checks for the same full amount got written out. In that case, I just hope the OP makes sure the check sent to them was invalidated so that the 401k company does not report it as being disbursed to them and thus taxable.

I don't understand why you would choose the indirect rollover. For anybody, having the money go direct to the new account avoids the withholding issues as well as the time lag while writing/sending checks.

Just to be clear, as your OP doesn't address this, you do realize the 60 day window applies not just the amount you got as a check but to the 20% they withheld as well, right? Otherwise that 20% is going to be treated as a distribution and taxed in 2018. Of course that may be your intent.

Unless I'm missing something.

eta - read that mess again. They seem incompetent. I guess the final question is did they send 100% of your balance to the IRA account, or 80%?

Couple of thoughts here....

I would recommend you contact the new place and make sure they do not let the 401k come and take money back as if it was an error.

Second I would also call the 401k and have them record you that this is what happened, you have voided the check.

You will receive a 1099-R from the 401k. It should show the complete distribution and no withholding. If it shows any, you must call and have it corrected.

If you use a tax preparer, just tell them what happened and they will know how to present it.

If you use Turbo Tax there is questions to answer when imputing the 1099-R

I have to state that I am not providing any tax advice here,please consult your tax advisor.

My transfer got screwed up a few years ago because they goofed up the 1099-R. Had to send a copy of the check to the IRS. The check was made out in both my name and new investment company proving it was a rollover and not a disbursement. I did not notice the error in the 1099-R when I filed my income tax. The bank that made the error was very helpful but still a lot of headaches.

quote:

Originally posted by Georgeair:
I don't understand why you would choose the indirect rollover. For anybody, having the money go direct to the new account avoids the withholding issues as well as the time lag while writing/sending checks.

Just to be clear, as your OP doesn't address this, you do realize the 60 day window applies not just the amount you got as a check but to the 20% they withheld as well, right? Otherwise that 20% is going to be treated as a distribution and taxed in 2018. Of course that may be your intent.

Unless I'm missing something.

eta - read that mess again. They seem incompetent. I guess the final question is did they send 100% of your balance to the IRA account, or 80%?

I meant 'direct rollover', not 'indirect'. Our intentions were for her old employer to send the funds DIRECTLY to the new IRA location, and not involve us at at all.

Ah man, I'm an idiot -- I just realized that we are okay -- the check they sent us looks basically 100% real / authentic and ready for us to deposit but ... it says 'this is not a check this is a statement of deposit' in small ass writing at the bottom.

My bad.

We can continue trash talking 401k companies though, if we'd like ...

quote:

Originally posted by Rey HRH:

quote:

Originally posted by shovelhead:
I don't understand how some of these 401K companies operate. Incompetent is the understatement.

I retired in June of last year and filed my paperwork for my disbursement. Instructed for remittance of my account to go to our account manager's firm to his attention. About two weeks later I receive an envelope from the servicing company. Mailed first class, not certified or registered, you know where this is going don't you?

Yep, enclosed was the check, in my name and the new management company's name. Brilliant, they had paperwork and they still screwed it up..........

To send a check of that amount as first class with no tracking is insane but what do I know?

All I can say is it gave me an excuse to put a hundred and twenty miles on the bike that day and personally deliver the check.

I find that a good number of companies are like that. They mail the check payable to you and your ira company and then you're suppose to mail the check to your ira company. I don't agree with the practice but that's what they do. I learned this because that was what i had to to after talking to the old 401k company.

Rey, the option to directly transfer the funds was one of the options available, that is the one I selected. Direct transfer to my new management firm. And a second check for the money paid after I terminated employment, which was in the next quarter was paid by a second check which was handled in the same way.

quote:

Originally posted by Copefree:
Ah man, I'm an idiot -- I just realized that we are okay -- the check they sent us looks basically 100% real / authentic and ready for us to deposit but ... it says 'this is not a check this is a statement of deposit' in small ass writing at the bottom.

My bad.

We can continue trash talking 401k companies though, if we'd like ...

Ha, I just deleted a post responding to your first post. Sounds like you are OK. You might want to confirm that all of the funds are pre-tax, which it sounds like they are.

Worth a shot at depositing?

If we are going to trash fairly must include 403b’s. Basically those are the non for profit 401k All I have to say is TIAA-CREF. That place in unbelievable. They have screwed up a one car funereal.

quote:

Originally posted by Jamess1:
If we are going to trash fairly must include 403b’s. Basically those are the non for profit 401k All I have to say is TIAA-CREF. That place in unbelievable. They have screwed up a one car funereal.

You got that right. I kept a log with date and time when making transfers from one fund to another and they messed up about half the time. They would later correct the mistake and give you credit for the correct price.

quote:

Originally posted by Copefree:
Ah man, I'm an idiot -- I just realized that we are okay -- the check they sent us looks basically 100% real / authentic and ready for us to deposit but ... it says 'this is not a check this is a statement of deposit' in small ass writing at the bottom.

My bad.

We can continue trash talking 401k companies though, if we'd like ...

I'm glad you sorted it out.

quote:

Originally posted by Rey HRH:

quote:

Originally posted by Copefree:
Ah man, I'm an idiot -- I just realized that we are okay -- the check they sent us looks basically 100% real / authentic and ready for us to deposit but ... it says 'this is not a check this is a statement of deposit' in small ass writing at the bottom.

My bad.

We can continue trash talking 401k companies though, if we'd like ...

I'm glad you sorted it out.

It happens. Glad there's no risk of tax confusion now.

If you're feeling benevolent, you might send them feedback suggesting they make the fine print a bit larger to avoid future confusion.