Legal Definitions - roll over

Roll over refers to the act of extending, renewing, or transferring an existing financial agreement, asset, or debt into a new arrangement. This action is often taken to maintain the financial status of an asset, consolidate funds, or manage debt obligations without immediate penalties or tax consequences.

• In the context of retirement savings, a rollover typically involves moving funds from one qualified retirement account to another. This is a common practice when individuals change jobs or wish to consolidate their retirement savings under a single account, such as an Individual Retirement Account (IRA).

  • Example: After working for "Tech Solutions Inc." for several years, David decides to take a new position at a different company. He has a 401(k) plan with Tech Solutions. Instead of leaving his funds with his old employer's plan, David decides to transfer the entire balance into a new Roth IRA he has opened with his financial advisor.

    Explanation: This is a rollover because David is transferring his retirement savings from one qualified retirement account (his old 401(k)) into another (his new Roth IRA) without withdrawing the money, thereby maintaining its tax-advantaged status and avoiding immediate taxes or penalties.

• For business loans and credit facilities, a rollover means extending the term of an existing loan or credit line, often by using the same facility to repay a maturing debt. This allows businesses to maintain access to capital or manage their repayment schedules.

  • Example: "Global Logistics," a shipping company, has a $1 million revolving credit facility that is scheduled to mature in three months. The company still requires access to this credit for its operational needs and has an outstanding balance. Global Logistics negotiates with its bank to "roll over" the facility for another two years under updated terms.

    Explanation: This is a rollover because Global Logistics is extending the duration of its existing credit agreement with the bank, allowing it to continue utilizing the facility and effectively deferring the full repayment of the outstanding balance that would have been due upon the original maturity date.