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Eligible Rollover Distributions (ERDs)

By Kurt Osterberg · On August 8, 2018

So, what funds can be rolled over from your qualified retirement plan (not an IRA) into another retirement plan or IRA? Interestingly, the IRS doesn’t specifically tell you what can be rolled over – but rather, what cannot be rolled over. So the definition of eligible rollover distributions includes any monies from a qualified account that are not specifically disallowed.

Let’s look at the definition from the IRS…

Definition of Eligible Rollover Distributions

Only Eligible Rollover Distributions, or ERDs, can be rolled over, according to the IRS. The definition that is given is really an anti-definition, explaining that any normally taxable distribution is eligible for rollover unless it fits the exceptions listed.

An ERD is defined as – a distribution that is eligible to be rolled over to an eligible retirement plan. Eligible rollover distributions include a participant’s balance in a qualified plan, 401k, 403b or 457 plan, except for certain amounts that include the following:

Any of a series of substantially equal periodic payments (SOSEPP) paid at least once a year over:

The participant’s lifetime or life expectancy,
The joint lives or life expectancies of the participant and his/her beneficiary, or
A period of 10 years or more

A required minimum distribution

Hardship Distributions

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

A loan treated as a distribution because it does not 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

Dividends on employer securities

The cost of life insurance coverage

So, as long as the distribution that you take from a 401k, 403b or 457 plan doesn’t fit any of the requirements above and has a payout period of 10 years or less, your distributions can be considered ERDs, and therefore rolled over into an IRA or other retirement plan.