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 If the owner takes receipt of the withdrawn assets before placing them into another IRA of the same type, this is called an indirect rollover.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.

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.

An indirect rollover is when assets from a retirement plan or IRA are payable to the individual and subsequently 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important to note, however, that if you do not deposit the funds into an eligible IRA within 60 days of receiving the withdrawn assets, the amount that you withdrew will be considered income and you will be taxed on that amount.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.

Until a distribution is rolled over into an IRA, it is treated as a taxable transaction in which case IRA withholding rules apply. For information that is specific to your situation, please consult your tax adviser.

Beginning January 1, 2015, the IRS has implemented a One-Rollover-Per-Year Rule. This means that you can make only one tax-free rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own. Please note, this rule does not affect direct transfers between IRAs of the same type.

The new interpretation of the IRA Rollover limitation aggregates all of your IRA types into one IRA. This means that the "Traditional" IRA includes assets that are designated under the simplified employee pension (SEP) plan. Furthermore, Roth and Traditional IRAs are aggregated for the purposes of one-per-year rule. For example, should you roll assets from your Traditional IRA into another Traditional IRA; you will not be permitted to roll any assets from your Roth IRA until the 12-month period elapses.

No, you will still be eligible for a rollover in 2024, but the distribution in 2024 must be from a different IRA than the IRA involved in the 2023 rollover.

Beginning in 2015, if you receive a distribution from an IRA of previously untaxed amounts you must include the amounts in your gross income, if you have made an IRA-to-IRA rollover in the preceding 12 months (unless the 2015 transition rule applies). If you are under the age of 59 ½, you may be subject to the 10% early withdrawal tax on those distributions.

Additionally, if you pay the distribution amounts into another (or the same) IRA the amounts may be treated as an excess contribution, which carries a penalty of 6% per year as long as the excess remains in the IRA. For information that is specific to your situation, please consult your tax adviser.

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 — Only one rollover is permitted 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 any of your IRAs. You may not roll over the same assets within 12 months.

Required Minimum Distribution (RMD) Restriction—You are not allowed to 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.

Effective August 24, 2016, the IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of a circumstance beyond your control. To apply for a waiver, you must file a private letter ruling request with the IRS. Please reference the IRS Revenue Procedure 2016-47 for additional details.

To roll over 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.

If you are rolling assets from your 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

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.

You may not complete more than one rollover 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 any of your IRAs.

There is no limit to the number of direct transfers you may complete per year between two IRAs of the same type.

The types of accounts that permit eligible rollover distributions to be rolled over to a SIMPLE IRA include the following: Traditional IRA, SIMPLE IRA, SEP IRA, Governmental 457(b) Plan, Qualified Plan (pre-tax), 403(b) Plan (pre-tax) and Qualified Annuities. The rollover contribution into the SIMPLE is only allowed after the end of a two-year period that begins on the date the participant first participates in the SIMPLE IRA.

Harbor Capital and its associates do not provide legal or tax advice.

Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or tax professional regarding any legal or tax issues raised in this material.

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