During the process of setting up your self administered, custodian free Solo 401k, you will at some point want to transfer the funds from your old custodian to your new retirement account.
Beware of your previous custodian’s potential errors when requesting your “trustee-to-trustee transfer” after you establish your trust account for your new retirement vehicle.
A trustee-to-trustee-transfers occurs when the current custodian of your retirement funds transfers the funds to the new custodian (you).
Within the retirement industry, the term trustee-to-trustee-transfer is usually used to refer to a transfer, where the assets are moved nonreportably between accounts of the same type.
The trustee-to-trustee transfer is a nonreportable transaction, which means that no 1099-R or 5498s are issued for the transaction.
Trustee-to-trustee transfers between accounts can occur for an unlimited number of times during any period.
Individuals who opt to have a check sent to them should exercise extreme caution when the check is requested.
Check to make sure that any paperwork completed is a ‘transfer’ request and not a distribution request.
Make it clear to the issuer that a 1099-R should NOT be issued for the amount.
Ask the issuer for a letter or some other confirmation that the transaction is a nonreportable transfer, and provide it to the receiving financial institution.
Get confirmation from the receiving financial institution will deposit it as a nonreportable transaction, and ask for assurance that they will not issue a 5498 for the amount.
It is fairly common for your previous custodian to be confused as to what is occurring. You may have to clarify your intentions repeatedly. Clearly state that this is a trustee-to-trustee transfer, not a distribution.
Occasionally clients have had to request a supervisor, or someone who is more knowledgeable on the subject of transfer requests.
Fear not, you’ll get beyond this bump in the road. The short-term frustrations of dealing with large financial institutions that stifle transactions, are just that, short term. Soon you’ll be able to brush the layers of roadblocks to the side and transact for yourself on your own schedule.