New investment company won't accept third party rollover check.

[Guest James Osterhaus]

A participant attempted to roll his money over into another 401(k) plan whose funds are located at another investment company. The current investment company only makes the distribution checks out to the trustee of the plan. We had asked the trustee to deposit the check and issue a check made payable to the new investment company. The company instead endorsed the check and forwarded it on to the new investment company. The new investment company rejected it, not accepting third party checks. The CPA for the trustee is insisting that having the company deposit a rollover check and write a new check to the new investment company is illigal. The question is: Is it legal to have the company deposit the rollover check and write a check made payable to the new investment company. The participant will not see the check at all. Also, where can I find printed documentation to prove/disprove the above question.

Thank you

James

[KIP KRAUS]

Why don't you ask the CPA for this information since he is saying it is illegal?

[Wessex]

This sounds highly unusual; it smells.

[Bill Berke]

In your paragraph, it seems to me that you are using "company" and "trust/trustee" interchangeably. I think it's perfectly okay if the trustee deposits the rollover check and immmediately writes a corresponding trust check for the rollover amount. The money has never left the trust. I just can't see a problem (watch me be wrong again). And the trust should have a checking account. If the rollover check was deposited into the employer's account with a cross check immediately written, that could be a technical violation (a PT, perhaps) but I can't see any agency creating any problems. The real problem is the second investment comnpay's rule of not accepting this type of third party check. With a trust checking account in existence this should be a simple matter to deal with.