How to complete Rollover Documents from a Retirement Plan into a new IRA Annuity (condensed simplified version of a rollover procedure)

Indirect Rollover/Distribution Two Types of Rollover Indirect Rollover/Distribution Direct Rollover Preferred Method Less Preferred Method Is from a qualified employer-sponsored plan such as 401(k), 403(b), 457(b), or TSP account to an IRA Annuity. A direct rollover is not taxable. The employee/participant never takes the possession of the proceeds. The funds are always sent directly from one custodian to the next. The proceeds are payable to the receiving company for the benefit of the participant. Example: a rollover check is made payable to: ‘annuity carrier’ FBO John Doe. The retirement plan assets are distributed to the employee/participant, who has 60 calendar days from the date of the rollover check to roll over the amount to an eligible IRA. The timing of the Indirect Rollover and any future additional funds may be challenging. The employer is generally required to withhold 20% of the distribution to send to the IRS as a tax deposit, so the employee/participant would have to use other funds to roll over the full amount of the distribution. Example: a rollover check is made payable to : John Doe. Direct Rollover: if you request a direct rollover from a qualified plan the check will be made payable to the new custodian FBO your client.  IT generates a 1099 but the taxable amount will show as zero. The check may mail to the client but the check isn’t payable to them.  It’s payable to the custodian for their benefit.  They don’t have the ability to take constructive receipt and deposit into their bank account. Indirect Rollover: If your client requests a distribution, then the check will be made payable to them.  They may deposit the check to their own account and they can utilize the 60 days for whatever reason and provided the funds are back into another qualified account (IRAs/QUALIFIED PLAN etc..?) then they can offset the tax consequence.  With a distribution the amount will show as taxable on the 1099 that is generated.  Of course they’ll be subject to the mandatory 20% withholding.  They can make this up out of pocket and roll over in full, or roll over for less. The 60 day rule per 12 month period would be considered an indirect 60 day rollover. And it only applies to DISTRIBUTIONS taken by the client from any IRA/SEP IRA/SIMPLE IRA/ROTH IRA….not a qualified plan like a 401k/403b etc…. Be careful of Custodians who make a check payable to a third party, while still reporting as a Distribution

Direct Rollover Indirect Rollover Qualified plan Rollover IRA Annuity If you request a direct rollover from a qualified plan, the check will be made payable to the new custodian FBO your client.  It generates a 1099-R, but the taxable amount will show as zero. The check may mail to the client, but the check is not payable to them.  The check is payable to the custodian for their benefit.  Client does not have the ability to take constructive receipt of the funds and deposit into their bank account. Indirect Rollover Qualified plan Rollover IRA Annuity Client Distribution Contribution Must be completed within 60 calendar days If your client requests a distribution, then the check will be made payable to them.  Client may deposit the check to their own account, or they can utilize the 60 days to move the funds into another qualified account, then they can offset the tax consequence.  With a distribution, the amount will show as taxable on the 1099-R that is generated.  Of course, the client will be subject to the mandatory 20% withholding.  The client can make this up out of pocket and roll over in full, or roll over for less. Only ONE indirect rollover is allowed in a 12 month period (not a calendar year)

Why is the paperwork important? It is important to complete the rollover documents accurately. The Rollover must be coded correctly, so there are no tax consequences to the Client. Incorrectly completed paperwork causes delays in processing, tax consequences for the client, and ultimately, delays in your pay. Qualified plan paperwork = Rollover or Transfer (not Distribution) Annuity application = Rollover IRA or Traditional IRA Make sure the qualified plan documents are coded as a ‘Rollover’, and the Annuity application is coded as a ‘Rollover IRA’, so the taxable consequence is not unintentionally created.

MAKE A CONFERENCE CALL TO THE RETIREMENT PLAN COMPANY Keep in Mind Most qualified employer-sponsored plans require their own Rollover/Withdrawal paperwork in order to move funds. They will not accept the Annuity Carrier transfer documents. MAKE A CONFERENCE CALL TO THE RETIREMENT PLAN COMPANY Make a conference call with the client to the retirement plan to obtain the required rollover documents. Ask what is required in order to move funds out of the qualified plan. This phone call will also give you a chance to verify that no rollover/distribution was completed within past 12 months. Find out the processing time; some plans can take up to 90 days to process (client will be informed from the beginning; it will add to your a credibility and trust). A 10 minute phone call will avoid a potential hold-up or cancellation of the annuity business.

Helpful Tips Fidelity 401(k) EXAMPLE No rollover documents are required = faster processing = faster annuity commission payout  Client needs to call Fidelity 401(k) phone number: 800-835-5095 to request a rollover Fidelity 401(k) will mail the rollover check to client’s address of record, made payable to: ‘annuity carrier’ FBO John Doe within 24-48 hours Please request a pre-paid UPS label from your JDM New Business Associate, so the client can overnight the check directly to the annuity carrier as soon as it is received

Helpful Tips EXAMPLE Thrift Savings Plan (TSP) The rollover documents can be downloaded from the TSP website: www.tsp.gov under Forms & Publications TSP has a separate form for a different situation ( retired or in-service; partial or full withdrawal). Most common TSP forms: TSP-70 Request for Full Withdrawal (client retired) TSP-77 Request for Partial Withdrawal (client retired) TSP-75 Age-Based In-Service Withdrawal (client still employed & over 59 ½ yrs old) TSP paperwork MUST BE notarized How to Complete the Documents: Either section II. or section III. (not both) must be completed. Client will know which section to fill out. Section: ‘Withdrawal Election’ must list 100% Single Payment. This refers to the amount of the transfer, not the overall TSP account balance. Annuity carrier is required to sign the Acceptance section of the form. Please submit the completed, signed and notarized TSP withdrawal documents along with the annuity application to JDM New Business for processing.