By Andy Ives, CFP®, AIF®
IRA Analyst

After a recent Ed Slott conference in Dallas, Texas, I found myself sitting in a hotel café, surrounded by travel bags, having pizza with a few meeting attendees with later flights. “Anyone want to share an Uber to the airport?” asked a lunch guest.

“Sure,” I said. “I’ll join you.” After all, the Uber was already ordered, and I am always more comfortable at my gate. Never know how long it will take to get through security.

The ride to the airport was pleasant, and the conversation enjoyable. I was headed to the East Coast, and she was headed west. Upon arrival, she jumped out at the Southwest terminal, and I told the Uber driver, “I am American Airlines.”

The Uber driver turned in his seat and said, “Wrong airport, dude.”

Turns out I needed to go to Dallas/Fort Worth. This was Dallas Love Field. Oops.

Apologies and a mad scramble ensued as the three of us tried to figure out the quickest and most efficient way to get me to DFW. Pay cash? Tack the trip onto the original Uber bill? Do I order another Uber myself and start over from here? In the end, the original Uber driver delivered me to my destination in plenty of time, and I made my gate with minutes to spare.

Regarding the original trip to Dallas Love Field, was anyone in the wrong? Was I or someone else at fault for the mix-up? I don’t think so. We just didn’t ask the proper questions. This was my first trip to Dallas. Assumptions were made. Some might call it “an honest mistake.” No harm done.

When plan assets are rolled over – money in motion – there is no such thing as an “honest mistake.” Ignorance will not fix things. Rules need to be followed and proper questions must be asked, regardless of whether or not this is your first rodeo. For example, plan distributions NOT eligible for rollover include:

– Required minimum distributions (RMDs)

– 72(t) payments

– Hardship distributions

– Distributions payable to non-spouse beneficiaries

– Corrective distributions of excess contributions or deferrals

– Deemed distributions (plan loan defaults)

– Dividends on employer securities

All parties must be careful not to allow these distributions to be mistakenly moved to the wrong location, or else a frantic attempt to fix the error will follow. The above items cannot go to an IRA as a rollover. If that happens, there is an excess contribution in the receiving IRA that, if not corrected in a timely manner, will be subject to a 6% excess contribution penalty for each year it remains in the IRA.

Oftentimes it is haste that makes waste. People get excited and nervous when they travel, and the same holds true when they receive a large distribution from a plan. They want to deposit the assets as soon as possible. However, be sure to ask the right questions on the front end. Do not assume and climb blindly into the rollover car. Be aware of what can and cannot be rolled over, because “Oops, my bad,” after an erroneous transaction won’t cut it. Apologies and sad-face doodles don’t fit on any IRS form that I am aware of, and there is no Uber driver ready to magically deliver the rollover assets from the wrong airport to the proper location.