Retirement Account Transfer/Rollover Information
The rollover or transfer of your retirement monies may be the most important and anticipated step in the process of gaining access to your retirement funds as a method of small business funding. The rollover process can seem complex however, Guidant can offer you significant understanding and experience in this area. We are available as your partners in this process and will provide the support you need to accomplish your rollover(s). Below are Frequently Asked Questions to help you in this endeavor.
What is a rollover?
When do I request my rollover?
You should request your rollover as soon as possible AFTER these 2 specific events have taken place:
- Your Corporation has been officially filed with the Secretary of State.
- You have held your initial conference with outside counsel.
Why should I wait until the initial conference with my outside counsel to request my funds?
Occasionally in the course of the initial conference with the outside counsel you may become aware of additional funding needs or you may discover that your original plans have changed and that a smaller amount of funds may be necessary. In rare cases, additional facts may come to light that make your use of our small business funding structure infeasible. Because it is far easier to change a rollover request prior to its submission to your custodian than it is to try and correct or stop it after the fact, we recommend you wait until after your initial conference with outside counsel.
Why should I wait until my Corporation has been officially filed with the Secretary of State?
When you request your rollover from your current custodian, the rollover must be made payable to your 401(k) Plan. So if your Corporation were called “Sample Business Inc.”, your 401(k) plan would be called “Sample Business Inc. 401(k) Plan”. But if your corporation has not yet been filed there is a possibility that the filing could be rejected and a name change may be required. Therefore, until the Corporation is filed there would be no guarantee that you would be requesting the funds in the name of the correct plan. If you receive a check made payable to an incorrect Corporate name, it is highly likely your bank will not accept the check.
How do I request a rollover/transfer of my retirement monies to my new 401(k) Plan?
I am paying Guidant for your services, why don’t you request my rollover for me?
Your custodian takes many precautions to prevent fraudulent or unauthorized activity on your retirement account(s). As such, they implement several policies to keep your funds safe, one of which is that only an account holder may request any type of transaction on an account. Only you, as the account holder, are authorized to direct the transfer of your monies. Due to these privacy regulations and policies we are unable to request that any action be taken on your account. But Guidant has made every effort to determine what your custodian will require of you to initiate your rollover and we’ll even walk you through completing the forms they require in addition to being available to phone conference with your custodian.
Why do I have to complete the paperwork? Can’t you do it for me?
We are not able to complete this paperwork for you because it is very important that you are making your selections and know what you are signing. But we are happy to help you understand the elections allowed by your current custodian and help you correctly complete their paperwork.
On the Rollover Form, what do I put for the account number of the receiving plan: my social security number or the 401(k) Plan EIN?
Ideally we recommend that you use the 401(k) Plan Employer Identification Number. Because your EIN cannot be filed with the IRS until after your Articles of Incorporation are filed with the Secretary of State, we know that waiting for your EIN may be impractical. In a case where it is urgent to request your rollover, you may use your social security number. But remember, you should not request your funds before your Corporation is filed with the Secretary of State.
Is it better for me to request the rollover as a check or as a wire transfer? Is there any difference?
There are several differences between receiving your rollover by check or a wire transfer. A rollover check would be a paper check sent to the 401(k) plan address whereas a wire transfer allows your custodian to send the cash directly to your 401(k) bank account. There are advantages to either option for you to consider:
Wire Transfer
- May increase the speed of your rollover
- Requires fewer steps from you
- No chance to lose a rollover check
Paper Check
- Allows you to confirm that the rollover is made payable to the 401(k) Plan
- Reduces the chances of the check being deposited in the wrong account
- Many custodians will not allow a wire transfer to be made to an alternate payee
- Some custodians are not set up to execute a wire transfer
If you have questions about which option will be most beneficial to you, you may discuss with your rollover specialist.
My custodian is asking me who the trustee of my new plan is, what do I say?
Typically, you are the trustee and custodian of your new 401(k) plan, NOT the bank where your 401(k) bank account is held. You are the individual with the fiduciary responsibilities tied to your 401(k) plan. You should indicate that to your custodian. The 401(k) plan Adoption Agreement, you will soon receive from Guidant, provides verification as to who the nominated trustees are.
The instructions that you sent me tell me that I need a Medallion Signature Guarantee on my rollover forms. What is that?
A medallion signature guarantee is similar to a notary signature in that the guarantor affirms the identity of the signor. However this type of signature verification is specific to securities and account transfers because the guarantor accepts liability in the event of forgery. The purpose of a medallion signature is to prevent unauthorized persons from withdrawing or transferring your retirement money without authorization. Please note that most custodians will not accept a notary signature in place of a Medallion Signature Guarantee.
Where/How can I get a Medallion Signature Guarantee?
Many financial institutions may have a Signature Guarantee service; however, because the guarantor accepts liability in the event of a forgery the easiest place to get this done is a bank or institution that you already have a relationship with. Consider consulting someone at a branch office of the company that handles your current retirement account or your local bank. We recommend calling ahead in case an appointment is required. There are now more than 7000 financial services companies that participate in the Medallion signature program. Remember, while obtaining this guarantee may be cumbersome, your custodian requires this for your protection.
Do I have to send the rollover paperwork to the overnight address that you provided me or can I take it directly to my bank?
Many custodians cannot process your paperwork at their local branches. Our Rollover Specialist contacts your custodian to find out the best location to send your paperwork. Though you may be more familiar with your local branch, many custodians use a central processing office and we’ve made every effort to cut out extra steps in the process that may cause delays. However, if you have any questions about where our instructions direct you to send the forms, do not hesitate to ask.
After I send my paperwork, how long will it be before I receive my money?
This varies significantly between custodians depending on the way that your account or plan was set up as well as how involved their process is. Unfortunately, Guidant cannot guarantee the timeliness of another company’s process. We make every effort to determine the general processing time of each institution and if you have questions about the time that your rollover is taking you may contact them directly for a status update. If you require assistance in this, please contact our rollover specialist.
I sent my paperwork to my custodian but they are telling me that what I have requested is a taxable distribution?
Unfortunately, there are some custodians who do not understand the process and when they hear that you are going to fund a small business they believe that you are taking a distribution. You may simply inform them that your funds will be rolled to another qualified retirement plan and that it is not a distribution. If they continue to delay or try to force you to take the funds as a taxable distribution, you may call our rollover specialist for assistance. In some cases they may ask for a letter of acceptance to confirm that you are the trustee. If your custodian requests this, give us a call and we can provide further assistance as needed.
I need to gain access to my money faster; is there anything I can do to get the money more quickly?
In addition to a standard direct rollover, you may have another option to consider: an Indirect Rollover. An indirect rollover involves requesting your rollover as a distribution to you that would normally be taxable but then depositing your funds to the 401(k) plan within the time period determined by the IRS, currently 60 days. There are many custodians that may be able to process a distribution more quickly than they are able to process a direct rollover. This may allow you to deposit the funds to your 401(k) plan much more quickly than by a direct rollover. However, indirect rollovers involve additional IRS reporting and a failure to correctly report this transaction can result in your funds being considered a taxable distribution. Therefore you should carefully consider all the ramifications before selecting this option.
What if I realize later that my corporation needs more money than I rolled over originally? Can I add more funding?
Although the Audeo is designed to facilitate one QES transaction, there is a method of adding additional funding that may work for some clients called a 2nd QES that allows an additional infusion of capital by directing your 401(k) plan to purchase additional stock in your corporation. There are often additional requirements associated with a 2nd QES transaction, including obtaining a 3rd party business valuation and offering the opportunity to purchase stock to all eligible employees, as required by law. It is important to note that this process requires the guidance of a qualified tax attorney and that costs of engaging an attorney for this purpose will be your responsibility. The attorneys in our Outside Counsel program are available to assist with this process.
How do I accomplish a 2nd, 3rd or even 4th QES transaction?
The first step is to contact your outside legal counsel to retain his or her services to help you with this process. Guidant can not facilitate any subsequent corporate stock sales or additional QES transactions unless you have such outside legal counsel to assist you. Depending on how much time has elapsed between the initial QES transaction and the later stock sales it may also be necessary for you to obtain a written appraisal of your business at your expense. After the outside counsel has helped you to determine this, you may contact our rollover specialist for assistance in requesting your additional retirement funds for the 2nd QES.
Quick tips:
While Guidant Financial Group is unable to request your funds on your behalf, we are available to help you. Based on the information you provide in your contract, we contact your custodian or plan administrator to request or confirm their rollover procedures. We will make every effort to provide the most current and accurate instructions for requesting your funds. When requesting your rollover the following tips may be helpful:
- Notify your custodian that you are requesting a direct rollover (not a distribution) to a new qualified plan.
- Detailing how you intend to use your retirement funds i.e. to fund a business can cause confusion for your custodian and may delay the rollover process. They are used to traditional investments such as stocks, bonds and mutual funds and are often unfamiliar with the process and regulations associated with non-traditional investing such as a C-Corporation.
- Request that your custodian or administrator provide you any forms necessary to complete a rollover of your retirement funds.
- Inquire whether they can fax or email your forms and whether they will accept the completed forms by fax or email (this may give you a faster option than overnight mail).
- Inquire about how long their process takes before they send the funds. Also, if requesting a check, ask if they will overnight the check when it is ready.
- After you have sent the rollover form, do not hesitate to call and check on the status of your rollover
