Rollover Eligible

Definition

Another name for eligible rollover distribution (ERD), which is used in reference to a distribution that is eligible to be rolled over to an eligible retirement plan. Eligible rollover distributions include a participant’s balance in a qualified plan, 403(b) or 457(b) plan, except for certain amounts that include the following:
    • Any of a series of substantially equal distributions paid at least once a year over:
        1. The participant’s  lifetime or life expectancy,
        2. The joint lives or life expectancies of the participant and his/her beneficiary, or
        3. A period of 10 years or more,
    • A required minimum distribution
    • Hardship distributions,
    • Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains 
    • A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan
    • Dividends on employer securities, and
    • The cost of life insurance coverage.
 
Referring Cite
IRC § 402(c)(2), IRC § 402(c)(4); Treas. Reg. §1.402(c)-2, Q&A-4
 
Additional Helpful Information
  • Eligible rollover amounts that are processed as a direct rollover are not subject to withholding tax
  • Eligible rollover amounts that are not processed as a direct rollover must generally be rolled over within 60-days: that is assuming the participant wants to rollover the amount. But see
  • Eligible rollover amounts that are not processed as a direct rollover are generally subject to a federal withholding tax of 20%. State tax withholding may also apply, depending on the State’s tax-withholding requirements