Definition of Individual Retirement Account (IRA) Rollover

provision of the IRA law that enables persons receiving lump-sum payments from their company's pension or profit-sharing plan due to retirement or other termination of employment to roll the amount over, tax free, into an IRA investment plan within 60 days. For distributions, unless the IRA funds are transferred directly to an eligible plan, the payor must withhold 20% of the distribution. If the participant then transfers only the remaining 80% to a new IRA, he or she will pay income tax and a penalty tax on the 20% withheld.