Virginia Insurance Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Virginia-Life-Annuities-and-Health-Insurance Question # 8 Topic 1 Discussion
Virginia Insurance Virginia Life, Annuities, and Health Insurance Examination Series 11-01 Virginia-Life-Annuities-and-Health-Insurance Question # 8 Topic 1 Discussion
A qualified plan participant elected a trustee-to-trustee transfer of rollover funds instead of personally receiving the funds and then rolling them over. This election permits the participant to:
A.
Avoid mandatory income tax withholding on the amount transferred
B.
Eliminate the possibility of funds being lost in the mail
C.
Significantly reduce the amount of time required for the transaction
D.
Eliminate the penalty tax that normally applies to rollover funds
A trustee-to-trustee transfer (A) avoids the 20% mandatory tax withholding required when funds are distributed to the participant and rolled over within 60 days.
Options B (lost funds) and C (time) are incidental, not primary benefits. Option D (penalty tax) is irrelevant; rollovers aren’t penalized if timely.
The Virginia study guide, per IRS rules, notes that direct trustee-to-trustee transfers bypass withholding, preserving the full amount for reinvestment. Reference: Virginia Life, Annuities, and Health Insurance study guide, section on "Retirement Plans."
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