How to Roll Profit Sharing Into an IRA

Profit-sharing plans are a type of qualified plan that allows rank-and-file employees to participate in the overall profits of the company for which they work. These plans can serve as a motivational tool for employees to make the company more profitable. Rolling these plans over to an IRA is a relatively simple process.

Instructions

1. Find a suitable IRA custodian or use one provided by your broker or financial adviser and open an account. Notify them that you intend to roll your profit-sharing plan into this IRA.

2. Fill out the IRA application and transfer forms, which your broker or IRA custodian will provide. You may also be able to download them from the Internet. Submit them to your broker or custodian after completion.

3. Notate on your transfer form how you want your assets transferred over. You can elect to have them transferred over in-kind, which means that your current portfolio allocation will remain unchanged. Or you can elect to have the securities in your plan liquidated before transfer, and then have the plan sent over in the form of cash.

4. Give your plan a week or two to transfer into your IRA. If you elect to have your plan transferred over in cash, then it may take a little longer, as the plan assets must first be liquidated. It will then take an additional three days for the transaction to settle.

5. Check your profit-sharing plan to make sure that no accrued investment income, such as interest and dividends, has swept into your plan after the transfer has taken place. Notify your IRA custodian if this is the case so that they can transfer the remaining balance, as well.

References

• IRS Pub. 590 - IRAs
• IRS Pub. 575 - Pension and Annuity Income