How to Roll Over a Pension Plan

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Pension plans are set up by an employer to provide retirement income to employees. Contributions are made into the plan by the employer and/or through employee salary deferrals. Qualified plans provide tax incentives to the employer, and employees are not taxed until they receive the funds. Non-qualified plans provide less tax incentives, but more flexibility. Rolling over pension plans requires an analysis of the pros and cons of the new plan. The process is simple but may take some time to complete.

Things You'll Need

  • Latest pension statement New account forms Pension rollover form

Evaluate Rollover Options and Start a New Account

  • Contact the pension plan administrator to discuss any requirements for withdrawal from the plan. Sometimes this information can be found on the website of the financial institution administering the plan. Check your statement for the website. Most plans require that you either reach a specific retirement age and/or separate from the company before you are allowed to roll over assets from the plan. Some non-qualified plans may remain in place (not rolled over) and allow you to withdraw funds at retirement age, but not before.

  • Decide where you should roll the pension plan to. The IRS guide for rollovers shows various types of retirement plans and the new plans they can be rolled into. The type of pension you have will be written on your statement or on the documentation you received when you enrolled in the plan. Discuss your objectives and financial situation with a financial adviser to assist in selecting the right plan. Understand how the new plan works and the types of investments it will be invested in. Ask about the pros and cons of a rollover vs. keeping the pension as well as any fees or commissions charged on the new account.

  • Start an account to move the pension into. The financial institution controlling the new account will provide forms to complete and sign. Some pension plans require their own rollover forms, so see your current plan administrator. Follow the instructions for completing the form carefully. Direct rollovers from one institution to another avoid taxation on the move. Give the new financial adviser a copy of your latest statement. If opening an online account, the same information will still be needed.

  • Don't be alarmed if the actual rollover takes several weeks to complete. Some institutions process rollovers out of their pensions only on a quarterly basis. (They carefully liquidate assets and close your account.). Follow up with your pension plan to ensure the rollover completes properly. Any residual amounts caused by dividends should be transferred to the new account. If your pension plan sends a check for your funds to you, take it to your new financial adviser immediately, because rollovers must be completed within 60 days to avoid a tax penalty.

Tips & Warnings

  • Make retirement planning decisions based on a complete financial plan, including considerations for taxes, estate planning and insurance needs.
  • Rollovers are made in cash. If your pension investments are liquidated at low prices, the value of your total rollover will be low. Consider partial rollovers or waiting for prices to rise.



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