Rollover From Employer's Plan Into an IRA: IRA Contributions and Transfers (2025 IRS Guide)

This guide covers “Rollover From Employer's Plan Into an IRA” within ira contributions and transfers. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs), published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan within 60 days you received the payment or distribution. The contribution to the second retirement plan is called a rollover contribution.

Rollover From Employer's Plan Into an IRA

You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's):

• Employer's qualified pension, profit-sharing, or stock bonus plan;

• Annuity plan;

• Tax-sheltered annuity plan (section 403(b) plan); or

• Governmental deferred compensation plan (section 457 plan).

A qualified plan is one that meets the requirements of the Internal Revenue Code.

Eligible rollover distribution.

Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following.

1. An RMD (explained under When Must You Withdraw Assets? (Required Minimum Distributions) in Pub. 590-B).

2. A hardship distribution.

3. Any of a series of substantially equal periodic distributions paid at least once a year over:

   1. Your lifetime or life expectancy,

   2. The lifetimes or life expectancies of you and your beneficiary, or

   3. A period of 10 years or more.

4. Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains.

5. A loan treated as a distribution because it doesn’t 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. See the discussion earlier of plan loan offsets (including qualified plan loan offsets) under Time Limit for Making a Rollover Contribution.

6. Dividends on employer securities.

7. The cost of life insurance coverage.

Your rollover into a traditional IRA may include both amounts that would be taxable and amounts that wouldn’t be taxable if they were distributed to you but not rolled over. To the extent the distribution is rolled over into a traditional IRA, it isn’t includible in your income.

.Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. See Form 8606 under Distributions Fully or Partly Taxable in Pub. 590-B..

Rollover by nonspouse beneficiary.

If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you can roll over all or part of an eligible rollover distribution from one of the types of plans listed above into a traditional IRA. You must make the rollover by a direct trustee-to-trustee transfer into an inherited IRA.

You will determine your RMDs in years after you make the rollover based on whether the employee died before their required beginning date for taking distributions from the plan. For more information, see Distributions after the employee's death under Tax on Excess Accumulation in Pub. 575.

Written explanation to recipients.

Before making an eligible rollover distribution, the administrator of a qualified retirement plan must provide you with a written explanation. It must tell you about all of the following.

• Your right to have the distribution paid tax free directly to a traditional IRA or another eligible retirement plan.

• The requirement to withhold tax from the distribution if it isn’t paid directly to a traditional IRA or another eligible retirement plan.

• The tax treatment of any part of the distribution that you roll over to a traditional IRA or another eligible retirement plan within 60 days after you receive the distribution.

• Other qualified retirement plan rules, if they apply, including those for lump-sum distributions, alternate payees, and cash or deferred arrangements.

• How the plan receiving the distribution differs from the plan making the distribution in its restrictions and tax consequences.

The plan administrator must provide you with this written explanation no earlier than 90 days and no later than 30 days before the distribution is made.

However, you can choose to have a distribution made less than 30 days after the explanation is provided as long as both of the following requirements are met.

• You are given at least 30 days after the notice is provided to consider whether you want to elect a direct rollover.

• You are given information that clearly states that you have this 30-day period to make the decision.

Contact the plan administrator if you have any questions regarding this information.

Withholding requirement.

Generally, if an eligible rollover distribution is paid directly to you, the payer must withhold 20% of it. This applies even if you plan to roll over the distribution to a traditional IRA. You can avoid withholding by choosing the direct rollover option, discussed later.

Exceptions.

The payer doesn’t have to withhold from an eligible rollover distribution paid to you if either of the following conditions applies.

• The distribution and all previous eligible rollover distributions you received during your tax year from the same plan (or, at the payer's option, from all your employer's plans) total less than $200.

• The distribution consists solely of employer securities, plus cash of $200 or less in lieu of fractional shares.

.The amount withheld is part of the distribution. If you roll over less than the full amount of the distribution, you may have to include in your income the amount you don’t roll over. However, you can make up the amount withheld with funds from other sources..

Other withholding rules.

The 20% withholding requirement doesn’t apply to distributions that aren’t eligible rollover distributions. However, other withholding rules apply to these distributions. The rules that apply depend on whether the distribution is a periodic distribution or a nonperiodic distribution. For either of these types of distributions, you can still choose not to have tax withheld. For more information, see Pub. 505.

Direct rollover option.

Your employer's qualified plan must give you the option to have any part of an eligible rollover distribution paid directly to a traditional IRA. The plan isn’t required to give you this option if your eligible rollover distributions are expected to total less than $200 for the year.

Withholding.

If you choose the direct rollover option, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the traditional IRA.

If any part is paid to you, the payer must withhold 20% of that part's taxable amount.

Choosing an option.

Table 1-5 may help you decide which distribution option to choose. Carefully compare the effects of each option.

Table 1-5. Comparison of Payment to You Versus Direct Rollover

.If you decide to roll over any part of a distribution, the direct rollover option will generally be to your advantage. This is because you won’t have 20% withholding or be subject to the 10% additional tax under that option. .

If you have a lump-sum distribution and don’t plan to roll over any part of it, the distribution may be eligible for special tax treatment that could lower your tax for the distribution year. In that case, you may want to see Pub. 575 and Form 4972, Tax on Lump-Sum Distributions, and its instructions to determine whether your distribution qualifies for special tax treatment and, if so, to figure your tax under the special methods.

You can then compare any advantages from using Form 4972 to figure your tax on the lump-sum distribution with any advantages from rolling over all or part of the distribution. However, if you roll over any part of the lump-sum distribution, you can’t use the Form 4972 special tax treatment for any part of the distribution.

Contributions you made to your employer's plan.

You can roll over a distribution of voluntary deductible employee contributions (DECs) you made to your employer's plan. Prior to January 1, 1987, employees could make and deduct these contributions to certain qualified employers' plans and government plans. These aren’t the same as an employee's elective contributions to a 401(k) plan, which aren’t deductible by the employee.

If you receive a distribution from your employer's qualified plan of any part of the balance of your DECs and the earnings from them, you can roll over any part of the distribution.

No waiting period between rollovers.

The once-a-year limit on IRA-to-IRA rollovers doesn’t apply to eligible rollover distributions from an employer plan. You can roll over more than one distribution from the same employer plan within a year.

IRA as a holding account (conduit IRA) for rollovers to other eligible plans.

If you receive an eligible rollover distribution from your employer's plan, you can roll over part or all of it into one or more conduit IRAs. You can later roll over those assets into a new employer's plan. You can use a traditional IRA as a conduit IRA. You can roll over part or all of the conduit IRA to a qualified plan, even if you make regular contributions to it or add funds from sources other than your employer's plan. However, if you make regular contributions to the conduit IRA or add funds from other sources, the qualified plan into which you move funds won’t be eligible for any optional tax treatment for which it might have otherwise qualified.

Property and cash received in a distribution.

If you receive both property and cash in an eligible rollover distribution, you can roll over part or all of the property, part or all of the cash, or any combination of the two that you choose.

The same property (or sales proceeds) must be rolled over.

If you receive property in an eligible rollover distribution from a qualified retirement plan, you can’t keep the property and contribute cash to a traditional IRA in place of the property. You must either roll over the property or sell it and roll over the proceeds, as explained next.

Sale of property received in a distribution from a qualified plan.

Instead of rolling over a distribution of property other than cash, you can sell all or part of the property and roll over the amount you receive from the sale (the proceeds) into a traditional IRA. You can’t keep the property and substitute your own funds for property you received.

Example.

You receive a total distribution from your employer's plan consisting of $10,000 cash and $15,000 worth of property. You decide to keep the property. You can roll over to a traditional IRA the $10,000 cash received, but you can’t roll over an additional $15,000 representing the value of the property you choose not to sell.

Treatment of gain or loss.

If you sell the distributed property and roll over all the proceeds into a traditional IRA, no gain or loss is recognized. The sale proceeds (including any increase in value) are treated as part of the distribution and aren’t included in your gross income.

Example.

On September 6, you received a lump-sum distribution from your employer's retirement plan of $50,000 in cash and $50,000 in stock. The stock wasn’t stock of your employer. On September 24, you sold the stock for $60,000. On October 6, you rolled over $110,000 in cash ($50,000 from the original distribution and $60,000 from the sale of stock). You don’t include the $10,000 gain from the sale of stock as part of your income because you rolled over the entire amount into a traditional IRA.

Note:

Special rules may apply to distributions of employer securities. For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Pub. 575.

Partial rollover.

If you received both cash and property, or just property, but didn’t roll over the entire distribution, see Rollovers in Pub. 575.

Life insurance contract.

You can’t roll over a life insurance contract from a qualified plan into a traditional IRA.

Distributions received by a surviving spouse.

If you receive an eligible rollover distribution (defined earlier) from your deceased spouse's eligible retirement plan (defined earlier), you can roll over part or all of it into a traditional IRA. You can also roll over all or any part of a distribution of DECs.

Distributions under divorce or similar proceedings (alternate payees).

If you are the spouse or former spouse of an employee and you receive a distribution from a qualified retirement plan as a result of divorce or similar proceedings, you may be able to roll over all or part of it into a traditional IRA. To qualify, the distribution must be:

• One that would have been an eligible rollover distribution (defined earlier) if it had been made to the employee, and

• Made under a qualified domestic relations order.

Qualified domestic relations order.

A domestic relations order is a judgment, decree, or order (including approval of a property settlement agreement) that is issued under the domestic relations law of a state. A “qualified domestic relations order” gives to an alternate payee (a spouse, former spouse, child, or dependent of a participant in a retirement plan) the right to receive all or part of the benefits that would be payable to a participant under the plan. The order requires certain specific information, and it can’t alter the amount or form of the benefits of the plan.

Tax treatment if all of an eligible distribution isn’t rolled over.

Any part of an eligible rollover distribution that you keep is taxable in the year you receive it. If you don’t roll over any of it, special rules for lump-sum distributions may apply. See Lump-Sum Distributions under Taxation of Nonperiodic Payments in Pub. 575. The 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes, doesn’t apply.

Keogh plans and rollovers.

If you are self-employed, you are generally treated as an employee for rollover purposes. Consequently, if you receive an eligible rollover distribution from a Keogh plan (a qualified plan with at least one self-employed participant), you can roll over all or part of the distribution (including a lump-sum distribution) into a traditional IRA. For information on lump-sum distributions, see Lump-Sum Distributions under Taxation of Nonperiodic Payments in Pub. 575.

More information.

For more information about Keogh plans, see chapter 4 of Pub. 560.

Distribution from a tax-sheltered annuity.

If you receive an eligible rollover distribution from a tax-sheltered annuity plan (section 403(b) plan), you can roll it over into a traditional IRA.

Receipt of property other than money.

If you receive property other than money, you can sell the property and roll over the proceeds as discussed earlier.

Rollover from bond purchase plan.

If you redeem retirement bonds that were distributed to you under a qualified bond purchase plan, you can roll over tax free into a traditional IRA the part of the amount you receive that is more than your basis in the retirement bonds.

Reporting rollovers from employer plans.

Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, 1040-SR, or 1040-NR, line 5a. This amount should be shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Enter the remaining amount, even if zero, on Form 1040, 1040-SR, or 1040-NR, line 5b. Also, check the box on line 5c for rollovers of Form 1040, 1040-SR, or 1040-NR. See your tax return instructions.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs): Traditional IRAs — Can You Move Retirement Plan Assets? — Rollovers — Rollover From Employer's Plan Into an IRA — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.