Had a conversation with Mass Mutual today about moving wifey's 403b and rolling it over into an IRA. There is a routine system for institutions to deal and make transfers to and from other institutions.
But Mass Mutual thinks it is exceptional and special, and that they don't have to use that routine back-and-forth system, to/from institution to another institution. They just don't want to be bothered.
Anyone on this message board is most likely aware of the reason for this routine system: it's so that people can avoid taking retirement funds too early, thus encountering a tax penalty. If the switch is made between the two institutions, then everything is "clean," and there need not be a possible tax hit, because the custodian did not actually send the money to the account-holder.
Mass Mutual's way around this is to tell my wife that the ONLY way the transfer can be made through them is to accept a disbursement check through the mail--- with the new mutual fund as the payee, rather than herself. Then WE must send the stoopid check, ourselves.
This is sleazy. They're just wanting to cut postage costs out of their budget, and they can get away with not hiring enough people in the first place in order to get this sort of thing done in a timely manner. Some might see it as a minor inconvenience. But this "process" is systemic. The Marketing Dept. Morons found a way to squeeze the nickel until the buffalo shits TWICE. Bastards.
Comments
You stated: "moving wifey's 403b and rolling it over into an IRA"
Did MM ask if your wife had an existing IRA account at another institution to where they could perform a custodian to custodian rollover?
The IRA account does not have to be funded, but; obviously a valid account must exist.
You also noted: " likely aware of the reason for this routine system: it's so that people can avoid taking retirement funds too early, thus encountering a tax penalty."
--- This wouldn't be high on my list of reasons.
FWIW ...
My wife retired from the North Carolina Public School System. She was able to do a direct transfer from the school systems retirement fund directly to her IRA account without her touching the funds. Somebody (I think) is spoofing you. Better check around with some other institutions before you act. When Mass Mutual starts losing possible rollover/direct transfer assets things will change if those that are affected bark loud enough.
If they are not a member of the ACAT Transfer System ... I'd move on.
Skeet
I did some roll-overs like that back in the dark days when we worried about the baud rate on our modems. Every time my employer came up with a new retirement scheme I rolled over the previous plan into my own control.
So I have seen this before. Just point the Mass Mutual distribution check at the sweep account with your new company, and figure out the rest after that.
In the long run you may be more irritated by the transfer fee they charge than the rigamarole with the check. I know I was. I don't remember that stinger from the good old days.
My thoughts, again, since you posted this for comment. Open the IRA account first. Once it is established then it can be funded from the direct rollover (or transfer) proceeds from the 403b as the IRA account will have been established to receive the funds.
If your wife receives the funds directly, MassMutual may want to withhold taxes considering it a cash out. I'm thinking it is best to go the direct rollover (or transfer) route (custodian to custodian) rather than your wife take procession of the funds thus putting her in the distribution loop (so to speak).
I'd call Value Line and ask them how you should proceed with a direct rollover since they would be the receiving firm. Perhaps, they can open the IRA and then proceed to pull the money directly from MassMutual without you having to even deal with them.
If not, then I'd visit a brick and mortar firm and talk with them face to face to see if they will do a direct rollover for your wife. I was able to do a direct rollover from my company's retirement plan into my self directed IRA with no problem whatsoever. All I did was sign the transfer paperwork and furnish a recent account statement and within about three days they (receiving firm) had the money. Again, I have heard of many stories about people taking the distribution directly and getting taxed as it was treated as a cash out.
I was contemplating a rollover, but hers is a little different, her contributions are Roth, but the employer's match is tax deferred, not sure how a rollover would work in that case anyways (might need to open a Trad IRA - she currently does have a Roth IRA).
My personal experience - when an insurance company oversees a retirement plan it's always more complicated and expensive than it needs to be.
- All pre-tax money (employer contributions, earnings on any money not in a Roth) that is eligible to be rolled over (e.g. not part of an RMD) will have 20% withheld. If you don't come up with the cash to make up the shortfall, that 20% will be treated as a withdrawal and subject to income taxes.
- Plans are allowed, but not required, to permit in-service withdrawals once one turns 59½. So check with the plan to see if it will permit you to cash it out.
I'm reasonably sure that you'll need to get two checks from the 403(b) to separate the pre-tax money from the post-tax money. I haven't gone back to check the rules on this part, though. You do need separate receiving accounts (Roth, Traditional) for the money that is rolled over. I'm certain of that.
TIAA is an insurer that is indeed incredibly complex. But it also provides less expensive 403(b)s than many other providers. Insurance companies are not always more expensive.
At that time Mr. Market was in a downward trend, so the time lag didn't get to me.
Have a good week, Derf
I had a similar transfer as Mass Mutual is suggesting. I made a partial transfer from my 401k at TRP to a new IRA account at Schwab about 6 years ago and I think I had to receive a check from TRP in the mail with Charles Schwab's name on it and I hand-carried it to the local CS office for deposit. I don't remember why I did it that way or if I was told to do it that way.
As for creating the IRA, FIRST: The forms I've been filling out are from Value Line, not from MassMutual. So, given the information provided on the Value Line forms, then Value Line will officially make the request for the rollover money.
...Which is where the rest of this proposition starts to make no sense. Why wouldn't MM just send the $$$ to Value Line, rather than to my wife? The check itself would be made payable to VALUE LINE. This just feels like another example of corporate America divesting itself of what the rest of us have a right to expect them to do. And gov't is owned and operated by Big Business. So nothing gets done to change this state of affairs.
If the check is made payable to Value Line, then it would seem there would be no reason to withhold the 20% mentioned above. It is not a distribution TO MY WIFE. But would they do it, anyhow? Who knows. Murphy's LAW: anything that can go wrong, will go wrong.
@saji1986 I dunno if it's a great idea to just let the 403b money sit there until it's time to "cash out." Typically, custodians charge a fee for allowing your wife to keep the money there, when she's stopped working for the employer which offered her the 403b account.
Another stoopid wrinkle: The "account number" for Mass Mutual's purposes identifies the EMPLOYER. Then how do you identify the account-holder? SS number, he told me.
Seems S.O.P at MM is SNAFU, eh? And by the way, the address he told me to use on the VL forms is in KC, MO. The official request for the rollover money would go to KC. Never ran into THAT particular address for MM before. I guess that doesn't surprise me, though. I dunno what they might still be doing at their Springfield HQ anymore. It's not the center of their universe, any longer. They now have a big operation just over the Connecticut line, 10 minutes away, in Enfield. Anyhow, Delaware hosts companies from everywhere, too. Jupiter and Mars and Pluto.
You're on the right track. Establish the IRA at Value Line, then authorize THEM to go get the funds from MassMut. They will send you the check(s) made out to VL and you forward them to VL. After they get it, you allocate it.
Always have the new administrator go after the money. They're bigger than we are.
Good luck,
Rono
I did attempt to follow that ordinary, customary procedure. But the scumbags at MassMutual think they're shit doesn't stink, and they insisted on sending the check to me. Then, I must send it along to the new custodian: Bruce.... We did at first send transfer forms to VL, but they dropped the ball. The forms fell into the Twilight Zone and there was never a single word from them. We'll be happy with BRUFX, I reckon.
"I reckon so." ---Josie Wales.
Sorry. I was confusing. In our cases, we always received the check made out to the new administrator but in our name. We just forward it on to the new house.
Good luck
Rono