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Identifying Self-Directed IRA for rollovers to 401(k)


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Starting up a new 401(k) and owner wants to roll money in from Self-Directed IRA. They sent me a copy of a checking account balance at some bank that, according to the owner, contained the money of several employees. Is there any substantiation I can request to make sure this mystery money is legit?

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I had a sort-of similar case a couple of years ago. We took over a 2-person plan (one doctor and one employee) and found that the statement for the employee's account was labeled as an IRA. The prior TPA said that it was really a plan account, but mislabeled. After several hours on the phone with the investment provider, we determined that it was not a trusteed account, and there would be nothing stopping the employee from taking the money out if she chose. We concluded that if there was no trustee then it could not be part of the plan trust. The good news is we got a VCP approved pretty quickly to move it out of the IRA and into an account titled under the name of the plan.

I'm not sure if this helps; in your case it sounds like the trustee probably does have authority over all of the assets if they are in a single checking account, so it's possible it could meet the requirements of a trust. The sponsor probably breached their fiduciary duty of diversification if all the assets are held in a checking account, but that is a separate matter.

I agree of course with the other posters who point out that IRA can by definition not contain assets for more than one person - the "I" stands for "individual" after all. Is it possible that the client is confused about the difference between an IRA and a plan? What type of plan did they have before?

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.

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