| Factor | What to know |
|---|---|
| Former vs. current employer | Former employer plans are generally freely rollable. Current employer plans require separation or an in-service distribution. |
| Rollover method | Direct rollover preferred. Indirect (60-day) rollover carries 20% withholding and timing risk. |
| Destination: IRA plan | Funds go to your IRA custodian first, then are invested into your IRA LLC or IRA Trust. |
| Destination: Solo 401(k) | Funds go directly to the Solo 401(k) trust. There is no custodian layer. |
| Employer stock in the plan | If you hold appreciated company stock, review NUA treatment with a CPA before rolling. |
Can you actually roll over your plan right now?
The answer depends on whether you're still employed by the plan sponsor.
Funds from a former employer's plan are almost always eligible for rollover. Federal law supports your right to move those funds. Eligible plan types include 401(k), 403(b), 457, profit-sharing plans, pension plans, and most government plans, including the TSP. See How do I roll over a 401(k) from a previous employer? for the step-by-step mechanics.
Current employer plans are a different story. Most plans prohibit distributions while you're still actively employed unless one of two conditions applies: you've reached age 59 1/2, at which point federal law requires your plan to permit an in-service distribution that you can then roll over, or your plan explicitly allows in-service distributions at a younger age based on years of service or other conditions, which is plan-specific and relatively uncommon. See Can I roll over my current employer's 401(k)? for more detail.
One additional exception worth knowing: if you previously rolled funds from a prior employer plan into your current plan, those rolled-in funds are generally eligible for distribution and rollover even if the rest of your current plan account is locked. Ask your plan administrator if you believe a portion of your funds may be available for rollover. If you're unsure whether your current plan allows an in-service distribution at all, your HR department or plan administrator can confirm.
What's the difference between a direct and indirect rollover, and why does it matter?
This is the single most consequential process decision you'll make.
A direct rollover moves funds from your employer plan directly to your new retirement account. You never touch the money. No taxes are withheld, there's no deadline to meet, and there's no limit on how many direct rollovers you can execute.
An indirect rollover, sometimes called a 60-day rollover, distributes the funds to you first. You then have 60 days to redeposit them into a qualified retirement plan. The complications compound quickly:
- 20% mandatory withholding. Your employer plan must withhold 20% for federal taxes the moment the check is cut to you. You receive 80% of your balance. To complete a full rollover and avoid taxes on the withheld amount, you must deposit 100% of the original distribution, including the 20% you didn't receive, within 60 days. The withheld amount is reconciled at tax time, but you have to front it out of pocket in the interim.
- One-per-year limit. IRS rules limit you to one indirect rollover per 12-month period across all retirement plans.
- No extensions. The 60-day deadline is strict. Missing it converts the distribution to ordinary taxable income, plus a 10% early withdrawal penalty if you're under age 59 1/2.
A direct rollover is the default for a reason: no taxes withheld, no deadline, no limit on how many you execute. Use one whenever it's available. The indirect method exists for situations where a direct transfer genuinely isn't possible, not as a preferred strategy in its own right. See IRA rollovers & transfers for a full walkthrough of both methods.
Where do the funds land, and does it differ by plan type?
Yes, and this distinction matters operationally.
For IRA-based plans, the IRA LLC and the IRA Trust, all funds must flow through your IRA account at the custodian, IRA Resources, in the case of Self-Directed Plans clients. Your employer plan sends the rollover to IRA Resources, who receives it and holds it in your IRA. From there, the IRA invests the funds into your LLC or Trust entity, which then holds the investment assets. The entity checking account is for investment transactions only and should never be a direct destination for incoming rollover funds. See All funding must flow through your custodian for the full rule, or How do I add funds to my IRA Trust? and How do I add funds to my IRA LLC? for the entity-specific steps.
For Solo 401(k) plans, there is no custodian layer. Your Solo 401(k) plan is a trust, and you serve as trustee. Rollover funds go directly into the Solo 401(k) trust bank account. You control the account from day one, which is the efficiency advantage the Solo 401(k) structure provides. See How do I roll over funds into a Solo 401(k)? for the process.
Important: Never instruct your employer plan to send rollover funds directly to your LLC or Trust checking account. That constitutes a taxable distribution, not a rollover, and can have severe tax consequences.
What happens if your plan has both tax-deferred and Roth funds?
Many 401(k) plans allow participants to make both traditional (pre-tax) and Roth (after-tax) contributions, resulting in two separate sub-accounts with different tax treatment. These two pools of money cannot be combined in your destination plan.
Rollover to an IRA: tax-deferred and Roth funds must go to separate IRA plans. They may not be combined.
Rollover to a Solo 401(k): both tax-deferred and Roth funds from a prior employer plan can move over, though they need to be tracked separately within the plan.
If you're establishing a Solo 401(k) and your prior plan had both sub-accounts, you may want to set up separate checking accounts to track the two pools. This is a plan administration best practice, not an IRS requirement.
Should you roll over employer stock, or keep it?
If your employer plan holds company stock with significant appreciation, stop before rolling it over. The Net Unrealized Appreciation (NUA) rules may make it more advantageous to take that stock as an in-kind distribution rather than rolling it into an IRA.
Here's why it matters: when you roll appreciated employer stock into an IRA, the IRA converts the entire future distribution into ordinary income. Under the NUA rules, if you take employer stock as a lump-sum distribution in kind instead, the cost basis is taxed as ordinary income immediately and the appreciation is taxed at long-term capital gains rates when you sell the stock later. Depending on your tax situation, this can be meaningfully less expensive than the ordinary income treatment an IRA rollover produces.
The NUA strategy is not appropriate in every case, and the mechanics require a triggering event, typically a lump-sum distribution. This is a planning decision that requires professional analysis before you execute the rollover.
Important: If your employer plan holds appreciated company stock, consult a CPA or tax advisor before initiating any rollover. Once the funds are rolled into an IRA, the NUA opportunity is lost and cannot be recovered after the fact.
Frequently Asked Questions
Does my former employer have to allow me to roll over my 401(k)?
Yes. Once you've separated from employment, federal law entitles you to roll over your vested account balance. Your former employer's plan administrator must distribute the funds. Plans may have their own procedural requirements, such as a waiting period or a requirement that you take the full balance. Contact the plan administrator to understand their specific process.
How long does an employer plan rollover take?
Direct rollovers from a 401(k) or 403(b) typically take two to four weeks. Government plans such as a 457 or TSP can take four to six weeks. Processing times depend on the responsiveness of the sending plan administrator; your new plan doesn't control the timeline on the outbound side.
Can I roll over a portion of my 401(k)?
Partial rollovers are permitted under federal law, but some plan administrators require that you roll the full balance and close your account. Check with your employer's plan administrator before assuming a partial rollover is available.
I have an old 401(k) from a job I left years ago. Is there a deadline to roll it over?
No. James, for example, left a job in 2019 and didn't roll his 401(k) over until 2026; the funds simply sat there, untouched, the entire time. Former employer plans often have limited investment choices and may carry higher administrative costs, so rolling to a self-directed structure gives you control and expands your options, but there's no IRS clock forcing the decision.
Do I need separate accounts to track tax-deferred and Roth funds in a Solo 401(k)?
Not by requirement, but it's common practice. Both pools can be rolled into a single Solo 401(k) trust, but they retain separate tax treatment and need to be tracked as such. Many plan administrators set up separate checking sub-accounts for tax-deferred and Roth funds to keep the bookkeeping clean.
Next Steps
You now understand the key variables that determine whether your employer plan rollover will go smoothly. The next question is which destination fits your situation. Use the Plan Finder if you're still deciding between an IRA LLC, IRA Trust, or Solo 401(k). If a Solo 401(k) is on the table, confirm you qualify with Solo 401(k) - Eligibility, then see Solo 401(k) - Setup Process for the full account-opening sequence. Ready to move forward with any structure? Start your application at Plans.