From: breinhar@access.digex.com (Robert B. Reinhardt)
Subject: Re: New 20% Withholding T
Organization: Express Access Online Communications, Greenbelt, Maryland USA
Date: Sun, 27 Sep 1992 16:41:41 GMT

In article <1686DCE80.MCMASTER@LSTC2VM.stortek.com> MCMASTER@LSTC2VM.stortek.com (Jim McMaster) writes:
>In article <2686.963.uupcb@spacebbs.com>
>mark.stevens@spacebbs.com (Mark Stevens) writes:
> 
>>To: MCMASTER@LSTC2VM.stortek.com (Jim McMaster)
>>
>>JM>I'm sorry, but I cannot get too excited about this.  If you have the
>>JM>foresight to set up a rollover IRA account or a 401(k) account with
>>JM>the new employer, you have no problem.  The intent behind this law is
>>JM>to get people to do exactly that.  Many people were tempted to keep all
>>JM>or part of the distribution check instead of rolling it over.  This
>>JM>law encourages you to avoid the temptation.
>>
>>Is the old employer REQUIRED to roll to an IRA if you request it?

How about the NEW employer?

>>I could see my current employer saying "We only cut checks to you,
>>we don't want to bother dealing with depositing to a trustee".
>>That's the type of situation that I don't like about this new law.
>>If the old employer is required to deposit to an IRA if requested
>>then I agree with you.
>>---
>> . DeLuxe./386 1.25 #42 .
>>
>I don't know about the law, but it would probably be in the best
>interest of the employer to make the check to the IRA.  That only costs
>them changing the name on the check.  The real bother would be for them
>to calculate 20%, withhold it, fill out the IRS forms (you *know* there
>would be at least one) and then accounting for the money until they
>send it to the IRS.
> 
>Tell me...which would you choose if you were the employer?
> 
>This is really strange.  I find myself typing things to "defend" a law
>with which I disagree.  I do *not* favor this law.  I just don't see it
>as an extreme hardship to get around the withholding.  The intent is to
>make it very painful not to roll it into another retirement account.
>Too many people were tempted to take some of the money out during the
>60-day window.  This is a wrong-headed way for Congress to remove the
>temptation, but they usually try to kill gnats with sledgehammers.  This
>is far from the stupidest law they have ever passed.  I would rather
>fight over things that really matter.
> 
>Jim McMaster

Okay Jim, let me step back in here for a sec...How about a case
(mine for example) wherein you go to work for a new employer, who
does not allow you to participate in their 401(k) program until
you've completed the 6-month probationary period.  So, until then
you roll over the entire (or less 20%) into a conduit IRA, which
has to remain put for 18-months (minimum maturity date offered
at my bank).  Then, at the end of 18 months, I want to roll that
money back into a 401(k) [ finally ], I can't because the maturity
date of my conduit IRA isn't within 7 days of the quarterly
"open election period for making changes to the 401(k) account."
This can't be too unheard of since 2 out of my last 3
employers worked this way (the other didn't even have a 401(k)
plan, which is yet another problem in this situation).

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                                 Robert B. Reinhardt
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Newsgroups: misc.taxes