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.

I would instruct the payer to make the check payable to Corp IRA FBO Participant, not over think and be done with it. Joe Participant is not going to be cognizant of all those nuances.

Yup. I was imagining ombskid might want some explanation about why it would not make sense to depart from what ombskid describes as the customary way, including identifying a beneficial owner. And, seeing the follow-up about an "intermediary", might want an explanation that it could be improper to pay a "corp." other than the licensed bank or trust company that would serve as an IRA's trustee or custodian.