Rollover from Self-Directed 401(k) to IRA

[waid10]

Prudential administers our physician office's 401(k) plan. However, we have some physicians who have “self-directed” accounts which are an off-shoot of the company 401(k) plan and those funds are held at another brokerage firm such as Charles Schwab. We have a physician who is retired and wants to roll over his 401(k) to an IRA, but Prudential is telling us that this physician must first move his money from his self-directed account back into Prudential in order for Prudential to process the roll-over. The physician is questioning whether that is a legal requirement as he prefers not to move his money from Charles Schwab back to Prudential because the physician will not be able to replicate his Bond portfolio with Prudential. The physician would prefer to move his money directly from Charles Schwab to his IRA.

Can anyone shed light on this? Is it possible to rollover directly from the self-directed 401(k) account to an IRA? Or must the self-directed account first be moved back to Prudential before the rollover can be processed?

Thanks.

[K2retire]

Prudential is correct that they can't move the money to an IRA unless they have it. Is the brokerage firm able to handle it without involving Pru? If so, will they issue the 1099-R?

[Bird]

Right, the issue is probably preparing the 1099-R, as well as the option election forms. Who is the third party administrator?

[waid10]

K2retire - I think that that is the actual question...can the money legally be rolled over directly by Schwab?

Bird - Prudential is the TPA.

[Lou S.]

Legally - sure.

Is it allowed by the terms of the Plan Document and the Prudential service agreement, that's the real question.

Also as has been stated, who will do the 1099-R reporting if Schwab does the rollover direct?

[Bird]

Legally - sure.

Is it allowed by the terms of the Plan Document and the Prudential service agreement, that's the real question.

I agree.

[DonReynolds]

If you want to rollover your 401k to IRA then the process is simple, but you need to make sure that you done the process within 2 months to keep away from any penalties and taxes on this transaction. Contact your 401k plan’s admin to done paperwork to roll your 401k over. Start the IRA account at your selected investment firm. The helps you to fill out the paperwork and have to check mailed directly to the account you opened. Deposit proceeds from your 401k to your new IRA within 2 months. [According to 401krollover_com/self-employed-401k-rollovers]

[mbozek]

Short answer to this question is what do the agreements between pru, the plan and schwab provide regarding redemptions of securities held in a directed brokerage account? Is the directed brokerage agreement solely between the participant and Schwab or does the participant agree that his account balance can only be distributed by the plan administrator. Plan admin is responsible for making sure that distribution complies with all IRS rules to make sure it qualifies for rollover status and to make sure that there is proper reporting of the distribution to the IRS. Therefore Plan Admin will control the distribution process. Participant will not like it but that's the rule.