Rollover nightmare

[Guest jetfaninmn]

A participant has taken his money from his IRA and wants to roll it into his retirement plan. The bank where the funds were held issued him a cashiers check for the funds and he mailed to his 401(k) custodian. The custodian rejected the cashiers check, and they mailed it back to the trustee of the plan. The trustee has not received it yet - 30 days later.

In order to re-issue a check, the participant must:

1. Pay $ 500 to the bank to cover an indemnity bond and then they will stop payment and immediately do a reissue or;

2. Wait 90 days until the bank will do it for free.

The funds will be out of the IRA over sixty days if he has to wait for a free reissue, and he cannot afford the $500.

What is he to do. I have never heard of a custodian rejecting a cashiers check, nor have I heard of a bank charging a fee to stop and reissue a cashier's check.

Ugh!

[Nate X]

I have seen custodians rejecting all sorts of forms of payments, but I've never heard of the bank fee. I'd like to know what bank this is so that I never do business with them. You may want to have the participant check his disclosure from the bank. Since the fee appears to be unreasonable, he may want to just pay the fee and then try suing them in small claims court. Just threatening to sue sometimes works also.

On a more practical note, this situation probably would qualify for an automatic waiver of the 60-day period. See Rev Proc 2003-16

[Appleby]

I have seen custodians rejecting all sorts of forms of payments, but I've never heard of the bank fee. I'd like to know what bank this is so that I never do business with them. You may want to have the participant check his disclosure from the bank. Since the fee appears to be unreasonable, he may want to just pay the fee and then try suing them in small claims court. Just threatening to sue sometimes works also.

On a more practical note, this situation probably would qualify for an automatic waiver of the 60-day period. See Rev Proc 2003-16

Hold on…how was the check processed? As a direct rollover made payable to the plan? if so, there is no 60-day limit on rolling over those funds. I know you said the bank mailed the client to the client, but they key is in how the check was processed ( direct rollover or regular distribution).

Check the link at http://www.bankersonline.com/operations/ci...difference.html and http://www.ckfraud.org/problems.html regarding the indemnity bond.

[Guest mjb]

Nate: You seem to be completely ignorant of banking law. The bank is charging $500 for the bond for the first check because a cashier's check is guaranteed by the bank and the bank cannot refuse to pay the funds to the party who presents it as it can do with a check drawn on the customer's account. The $500 is not being kept by the bank but will be paid to a bonding/surety co which will reimbuse the bank for the amount of the first check if the bank has to pay it and will then assume the risk of collecting the proceeds of the check from the party who cashed the check. The bank is justified in its concern that the customer could deposit both checks and the bank would be liable to pay on both under banking law. The fee is not unreasonable because the customer can refuse to pay it.

A: the facts state that the check was issued to the participant but Jet fan can tell us for sure.