Distribution Check

Former employee returned standard distribution election form (CCH):

Rollover to "IRA"

Name of IRA:  "xxx xxxx Corp" 

We have always instructed trustee to make checks payable to : "xxx Corp IRA FBO former participant"

Any thoughts on if writing the check to just a Corp. is ok? Does it leave the plan with any liability as to the tax exempt status of the distribution?

An Individual Retirement Account’s trustee or custodian is a bank, trust company, or Treasury-approved nonbank custodian, typically a securities broker-dealer. An Individual Retirement Annuity’s insurer must be an insurance company.

If neither the check nor any accompanying instructions names the individual, won’t the payee financial-services business decline to accept the payment?

It appears there is an intermediary of some sort who would get the funds and then - we don't actually know. Does the intermediary get a fee, then send the balance to a bank or trust company? Is the tax deferred status affected? That's the kind of question we are having before telling the trustee to make the distribution.

Wow!  Sounds like a scheme to skim off a fee.  Why would the PA want to assist that?   

Never look for trouble.

If making a payment payable to a payee other than the retirement plan’s participant, beneficiary, or alternate payee (presumably because the distributee requested a direct rollover), the plan’s administrator, trustee, custodian, and payer (among them) have some responsibility to check that the payee not only is the one the distributee instructed but also is a banking, insurance, or securities institution Internal Revenue Code § 408 recognizes as an IRA custodian.

Else, the plan might not get a satisfaction or discharge of the plan’s obligation to pay the plan’s benefit.

This is not advice to anyone.