Education & FAQs

Rollover Questions
What is a rollover? Show
A direct rollover is the movement of assets from a retirement plan into an IRA without tax consequences. Rollovers can also be between two IRAs, if the individual takes receipt of the withdrawn assets before placing them into another IRA of the same type. This is an example of an indirect rollover. For more information on direct and indirect rollovers, please refer to the next questions.

Distributions, for the purpose of a rollover, are tax-free as long as the assets are contributed into another IRA within 60 days of receiving the distribution. Assets can be moved between two IRAs of the same type or between a qualified retirement plan (QRP) and an IRA.

What is a direct rollover? Show
A direct rollover is when assets from a retirement plan are directly payable to the financial organization where the IRA is held, and not to the individual. Generally the amount may come from the following sources:
  • Employer qualified retirement plan, profit-sharing or stock plan
  • Deferred compensation plan of state or local government (Section 457 plan)
  • Tax-sheltered annuity plan (Section 403 plan)
  • Annuity plan

By directly rolling over your assets from a retirement plan, you can avoid the mandatory withholding of 20% that applies to all withdrawals from a retirement plan. However, your assets must be eligible for a rollover.

Please note that a direct rollover is not taxable, but it is reportable to the IRS. You and the IRS will receive both Tax Form 1099-R and Tax Form 5498 for the tax year in which you completed your rollover. For information that is specific to your situation, please contact your plan administrator or tax adviser.

What is an indirect rollover? Show
An indirect rollover is when assets from a retirement plan or IRA are payable to the individual and contributed into an eligible IRA account within 60 days. Usually, an indirect rollover involves the following steps:
  1. You withdraw money from an IRA or retirement plan, and the IRA or plan sponsor sends you the proceeds from your distribution.
  2. You deposit the proceeds of the distribution into your bank account.
  3. You deposit the funds into an eligible IRA account within 60 days, as a rollover contribution.

It is important to note, however, that if you do not deposit the funds into an eligible IRA within 60 days of receiving the withdrawn assets, the amount that you withdrew will be considered income, and you will be taxed on that amount.

The distribution from your originating IRA or retirement plan account will be reported to the IRS on Tax Form 1099-R. Depending upon your age, the distribution will be reported as premature or normal. When the "rollover contribution" is made to the receiving IRA, the financial organization will report the transaction to the IRS on Tax Form 5498.

A distribution that is rolled over to an IRA is treated as a distribution to you at the time it is taken from the IRA and IRS withholding rules apply. For information that is specific to your situation, please consult your tax adviser.

Are there any restrictions on rollovers? Show
Yes, there are four restrictions on IRA-to-IRA Rollovers:

60-Day Restriction — You have 60 days to complete a rollover. The 60 day time period begins on the day after you receive the distribution.

12-Month Restriction — You may not complete more than one rollover per IRA in any 12 month period. One year must pass from the date of a distribution before you are eligible to roll over another distribution from the same IRA. You may not roll over the same assets within 12 months.

Required Minimum Distribution (RMD) Restriction—You may not roll over your RMD amount. You must first satisfy your RMD before you can roll over assets from one IRA to another IRA.

Irrevocable Rollover Restriction—For Traditional and Roth IRAs, you must irrevocably designate in writing at the time of the rollover deposit that the contribution is to be treated as a rollover.

How can I roll my Traditional/Roth assets to Harbor? Show
To rollover assets to Harbor, please send a personal check made payable to Harbor Funds, along with either the Invest by Mail Form or the Additional Investments form. Please indicate on the form that your contribution is an IRA Rollover. Please note: a rollover contribution, once deposited, is irrevocable.

Generally, when you roll over IRA assets, you will receive a check payable to you. You must deposit that check into your own checking account and then issue a personal check for the IRA rollover. Harbor will not accept a check that is payable to anyone other than Harbor Funds, even if it is endorsed.

How can I roll over my assets from a QRP to an IRA? Show
If you are rolling assets from your Qualified Retirement Plan (QRP) to your existing IRA, please complete the Account Transfer form and mail it to Harbor Funds. In turn, Harbor will submit the form to your plan administrator on your behalf.

If you do not have an existing IRA or you do not want to comingle your assets with your existing IRA, please complete the IRA Account Application and mail it along with the Account Transfer form.

Mail the form(s) to the appropriate address below:

First class mail to:
Harbor Funds
P.O. Box 804660
Chicago, IL  60680-4108

Express or registered mail to:
Harbor Funds
111 South Wacker Drive
34th Floor
Chicago, IL  60606-4302

What is the difference between a transfer and a rollover? Show
IRA-to-IRA transfers (Traditional-to-Traditional or Roth-to-Roth IRA) occur when IRA funds or assets are moved from one financial organization to another without the IRA owner having control or custody of the funds. Transfers between like IRAs do not have to follow the rollover restrictions. A transfer between two like IRAs is a non-reportable transaction.
How many rollovers can I complete annually? Show
You may not complete more than one rollover per IRA in any 12 month period. One year must pass from the date of a distribution before you are eligible to roll over another distribution from the same IRA.
How many direct transfers can I complete annually? Show
There is no limit to the number of direct transfers you may complete per year between two IRAs of the same type.