A direct rollover is one in which the rollover is made directly between two investment providers. Portability rules allow direct rollovers between your 403(b), 401(a), IRA and 457(b) government plans. If the rollover is a direct rollover the 20% mandatory withholding is waived.
An indirect rollover is one in which the proceeds are distributed to the participant, who later rolls over the funds into the eligible account. In that case the participant can forward the rollover amount of up to the 80% received along with 20% of the forwarded amount made up from an additional source such as personal savings to maintain the tax deferred status. The indirect rollover must be made within 60 days from receipt of the distribution.
