direct transfer trip definition

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Direct Transfer: What it is, How it Works, Types

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is a Direct Transfer?

A direct transfer is typically a transfer of assets from one type of retirement plan or account to another, which is facilitated by the two financial institutions involved in the transfer. A direct transfer is usually done when an employee has left their job and transfers the money within their 401(k) retirement plan into an individual retirement account (IRA) or another retirement plan.

A direct transfer is also called a trustee-to-trustee transfer since the individual does not receive the money, but instead, the two financial institutions facilitate the transfer on behalf of the employee.

A direct transfer can also mean any electronic transfer of money from one financial account to another, such as a wire transfer . However, it usually refers to a direct transfer of IRA funds between retirement accounts. As a result, a direct transfer is often called an IRA rollover, but there are some distinct differences between the two since not all rollovers are direct transfers.

Key Takeaways

• A direct transfer is typically a transfer of money from one retirement account to another, facilitated by the two financial institutions involved.
• A direct transfer is usually done when an employee has left their job and transfers the money within their 401(k) into an IRA.
• A direct transfer is also called a trustee-to-trustee transfer since the individual does not receive the money.

Understanding Direct Transfers

Transfers of funds can be processed in a number of ways. A wire transfer, for example, is an  electronic transfer  of money using a network of banks or financial companies. A wire transfer is a fast and secure way to move money since the account owner doesn't need to withdraw or physically handle the money.

Account owners can also initiate a transfer directly from one of their accounts to another, such as a savings account, via a mobile banking app, which is a software application installed on the mobile device.

When transferring money between retirement accounts, account holders need to pay particular attention to the type of transfer method they choose—a direct transfer is one of those choices. Sometimes an account holder might want to transfer the money within an IRA savings account into another IRA savings account at another bank. Other times, an employee might leave their job and want to transfer their 401(k) balance into an IRA or the 401(k) at the person's new job. These transfers are often called a rollover, and the IRS has outlined a few ways in which this can be done.

Types of IRA Rollovers

Below are three methods in which to transfer IRA funds between different IRA accounts.   However, there are specific guidelines and rules that need to be followed to ensure the transfer is done properly in order to avoid IRS penalties and tax implications.

Direct Rollover 

A direct rollover is when the balance within a qualified retirement plan , such as a 401(k), can be transferred directly to another retirement plan or to an IRA. In other words, you would ask the retirement plan administrator to make the payment to the new account. The 401(k) administrator might issue your distribution or withdrawal in the form of a check made payable to your new account.  

In other words, the check is not made payable to the account owner, but instead, it's made payable to the new account at the financial institution that's due to receive the funds. As a result, no taxes will be withheld from the transfer amount. However, the drawback to this method is that the account owner is responsible for receiving the check and depositing it into the receiving bank.

60-Day Rollover

If a distribution from an IRA or a retirement plan is paid directly to the account owner, the funds must be deposited into an IRA or a retirement plan within 60 days. Taxes will be withheld from the distribution from a retirement plan, which is typically 20% of the distribution amount. The 20% that was withheld by the IRS would be returned to the taxpayer when they filed their taxes for that tax year. 

However, the account holder would still need to deposit 100% of the balance that was withdrawn within 60 days. In other words, the account owner would have to come up with an extra 20% to ensure that the full amount that was withdrawn was re-deposited within the 60-day limit. 

If all or a portion of the funds is not deposited within 60 days, it will count as a distribution. As a result, the account owner will need to pay income taxes on that amount. Also, if the account owner is under the age of 59½, the IRS will charge a tax penalty of 10% on any of the funds that were not re-deposited into an IRA.   

Trustee-to-Trustee Transfer

A trustee-to-trustee transfer—or a direct transfer—is when the distribution is not paid directly to the account holder, nor does the account holder receive a check made payable to the new account.

The account owner would ask the financial institution holding the existing IRA to make the transfer directly from the existing IRA or 401(k) to another IRA or retirement plan. With a trustee-to-trustee transfer, no taxes are withheld from the transfer amount. Also, the transfer does not count as a distribution, meaning that the amount is not considered taxable income.  

A direct transfer between two trustees—or financial institutions—is the safest method to move IRA funds from one retirement account to another.

Types of Qualified Retirement Accounts

Direct rollovers or transfers from qualified retirement plans occur when the retirement plan administrator pays the plan’s proceeds directly to another plan or IRA. The IRS provides a guide to common qualified plan requirements.  

In general, qualified retirement plans meet the requirements of Internal Revenue Code Section 401(a) and are thus eligible to receive certain tax benefits.   They usually come in two forms: the defined benefit plan, such as a pension plan , and the defined contribution plan, such as a 401(k). A cash balance plan is a hybrid of these two.    

Examples of qualified retirement plans include:

• 401(k) plans
• Profit-sharing plans
• 403(b) plans
• Money purchase plans
• Employee stock ownership ( ESOP ) plans
• Salary Reduction Simplified Employee Pension (SARSEP)
• Simplified Employee Pension ( SEP )
• Savings Incentive Match Plan for Employees ( SIMPLE )

Internal Revenue Service. " Types of Retirement Plans ." Accessed Dec. 10, 2020.

Internal Revenue Service. " Rollovers of Retirement Plan and IRA Distributions ." Accessed Dec. 10, 2020.

Internal Revenue Service. " A Guide to Common Qualified Plan Requirements ." Accessed Nov. 8, 2020.

U.S. House of Representative: Office of the Law Revision Counsel United States Code. " 26 USC 401: Qualified pension, profit-sharing, and stock bonus plans ." Accessed Nov. 8, 2020.

U.S. Department of Labor. " Fact Sheet: Cash Balance Pension Plans ." Accessed Nov. 8, 2020.

Internal Revenue Service. " Tax Information for Retirement Plans ." Accessed Nov. 8, 2020.

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Substation Design | Power System Analysis

Directional Comparison Blocking Scheme

The Directional Comparison Blocking (DCB) scheme is the most popular pilot relaying scheme, implemented to protect high voltage power lines. This scheme is more dependable than a permissive overreaching transfer trip scheme because it trips the breaker even when there is no carrier signal from the remote end pilot relay. Let’s dive into details.

Equipment Needed for Directional Comparison Blocking Scheme

Implementation of directional comparison blocking scheme, advantage of directional comparison blocking scheme.

• Distance relay like the Schweitzer 421 .
• Pilot relays like Pulsar TC-10B or Ametek’s UPLC-II . They generate carrier frequency.
• Hybrids – either balanced (resistive or reactive) or unbalanced a.k.a. skewed. Hybrids multiplex multiple signals (Tx/Rx) from the carrier equipment onto a single coax wire while minimizing signal distortion.
• Line tuner. It’s a band pass filter. It permits the passage of carrier frequency from the pilot relay on to the transmission line. It also contains an impedance matching transformer so that the carrier signal on a 50ohm coax wire does not reflect due to a transmission line with ~400ohm characteristic impedance.
• Capacitor Coupled Voltage Transformer . This device too provides a path for the carrier frequency, onto the transmission line. The capacitor in this device, combined with the inductance inside the line tuner, creates an RLC resonant circuit. The resonant frequency selected is the same as the carrier frequency.
• Wavetrap . It’s a band stop or notch filter (made of capacitor and inductor). It limits the carrier signals to the intended line section and prevents its propagation into the substation. Imagine it as a wall that blocks the carrier frequency.

High-speed tripping logic for DCB = Fault in Zone 1 OR Fault in Zone 2 AND no blocking signal received (from zone 3).

Let’s examine the DCB scheme using the figure below and its scenarios.

Fault @ F1 on T-line: This fault is internal to the circuit breakers CB1 and CB2. These breakers are the closest to the fault, and tripping them will isolate the fault. In this scenario, CB1 and CB2 trip without delay, by SEL-421.

Fault @ F2 on T-line: This fault is external to CB1 and CB2 but internal to CB3 and its remote end breaker(s). Since (time-delayed) zone 2 protective element on the CB1 relay can trip on it, it should be blocked. The intent is to trip the breakers local to the fault rather than taking out a larger portion of the system.

Thus, while CB3 takes measures to isolate the fault, CB2’s zone 3 element (looking backward) detects this fault as external and keys a “block from tripping” signal to CB1.

Do note that this blocking is not perpetual. The SEL-421 at CB1 is on a time-delayed logic and will eventually trip CB1, thus providing backup to CB3 when it fails to operate.

Fault @ Bus1 CB’s 1, 4, and 5 should trip to isolate the fault on Bus 1. A bus differential relay executes this job via a 86 lockout device. Contact from this 86 relay is also used to engage the 85 device – to key the block signal to remote-end (to stop CB2 from tripping on zone 2). Ofcourse, zone 3 element from CB1 relay transmits the block signal as well. See figure 2 for the oneline implementation of this scheme.

The above setup is quite simplified with only one device transmitting the carrier frequency. In practice, you could have 2 devices transmitting or 1-transmitting & 1-receiving or 2-receiving, etc. If you wish to multiplex multiple signals onto a single coax wire then you will need something called the hybrids. Furthermore, there is a very specific way to tie the hybrids (in order to decrease the signal-loss). It is beyond the scope of this article to explain this, however, read this resource (specifically page 27) that goes in great detail.

The distance protection using the DCB scheme is typically used as the first line of defense, especially when the comm channel is the power line carrier. The backup scheme tends to be either POTT or DCUB.

DCB is a dependable scheme because in the event the communication channel gets disrupted, the relays do not sit idle, waiting on the carrier signal. It only needs the channel to transmit a block signal for external faults.

On the flip-side, you wouldn’t know the channel has issues until the system gets activated or gets tested. To check the integrity, a test signal a.k.a. checkback is transmitted 3 or 4 times a day.

This article, part of a series, covers the essentials on pilot relaying and pilot protection schemes. If not done already, start at the beginning.

• Basics of Pilot Relaying & Application Considerations For Transmission Line Protection
• Directional Comparison Blocking Scheme (DCB)
• Permissive Overreaching Transfer Trip Scheme (POTT)
• Directional Comparison Un-Blocking Scheme (DCUB)
• Direct Transfer Trip Scheme (DTT)  (This is technically not a pilot scheme but requires a pilot channel)

5 thoughts on “Directional Comparison Blocking Scheme”

Any disadvantage(s) for DCB?

I am sorry I assumed that zone 2 under DCB is the same as zone 2 under distance protection , now everything makes sense . Thank you !!!

CB 1 has zone 2

I have two questions for fault F2 on line , why are we blocking the tripping of CB1 , as CB 1 has zone and fault f2 , occurs on zone 1 for CB 3 , CB 3 will go out faster anyways than CB 1 , so why are we doing that ? Second , if should CB3 fails to operate you want CB2 to operate first the breaker nearest to CB 3 , now that being said , it then indeed makes sense to block CB 1 from tripping beacuse , if CB 3 fails CB2 will operate and clear the fault , and CB 1 will be blocked from tripping under zone 2 . So that is my main point of confusion .

Thanks for these information. Finally able to kill my confusions.

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Aleen Mohammed

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Understanding Permissive Over-Reaching Transfer Trip (POTT) Communication Assisted Trip Schemes Video

Here is the latest video describing the Permissive Under-Reaching Transfer Trip Communication-Assisted Trip Schemes used in modern distance protection.

You can follow along with this animation via the Can You Predict What Happens in a Permissive Over-Reaching Transfer Trip (POTT) Scheme? post found under the Testing handbooks / Book Extras menu.

You can also get more information about End-to-End Testing and all of the communication-assisted trip schemes via The Relay Testing Handbook: End-to-End Testing .

Here’s the video:

Here’s a transcript:

Welcome to the fifth video in our end-to-end testing series.  We’ll be looking at a Permissive Over-reaching Transfer Trip, or POTT, communication-assisted trip scheme in this video.

I’m going to assume that you’ve watched the previous videos in this series; so I won’t rehash what to look for in this animation. If you have not watched the previous videos, stop now and click this link to watch them first, so you can follow along.

Now that the introductions are out of the way, we can start by decoding the term POTT:

• The “P” stands for “Permissive.” A Permissive scheme tells the other relays protecting a line that they can trip faster if they ALSO detect a fault in the correct direction. All relays must agree that there is a fault on the line before a Permissive trip is allowed, unlike the direct scheme that would send a trip signal if only one relay detected a fault. Permissive schemes share information back and forth, so you will need your fancy GPS and/or IRIG connected equipment on ALL sides of the line.
• The “O” stands for “Over-reaching”. Zone-2’s pickup impedance is typically set larger than the protected line, which means at least one relay must measure a Zone-2 fault for this scheme to work.
• “TT” means that at least one relay is sending a Transfer Trip signal to the other relays in the scheme.

You’re looking at an animation of a traditional POTT scheme that you can find on our website, relaytraining.com.  There should be a link on the screen right now that you can open in a new window if you want to follow along. The link can also be found in the description below.

Which elements will pick up in Relay-1 if a fault occurs close to Relay-1 as we show here?

Which elements will pick up in Relay-2?

Zone-1 AND Zone-2 will pick up in Relay-1 because the fault is closest to Relay-1, while only Zone-2 will pick up in Relay-2.

Relay-1 will trip instantaneously because of the Zone-1 pickup, but it will also send a POTT signal to the other relay because it has detected a Zone-2, or potential over-reaching, fault on the line.  We call Zone-2 an Over-reaching condition because it is purposely set somewhere around 120% of the line as we described in the previous videos. Zone-2 is purposely set to detect faults in the section between the Zone-1 limit and the rest of the line, AND it provides backup protection for faults on other lines in the forward direction. This means that Zone-2 will detect faults that may not be on the transmission line this relay is installed to protect.

The fault is still on the line even though Relay-1 tripped and current is flowing through Relay-2. How long will it take before Relay-2 trips?

Relay-2 would normally trip after a 20-40 cycle Zone-2 time delay in a standard impedance protection scheme, but Relay-2 received a Permissive Over-Reaching Transfer Trip from Relay-1. This POTT signal from the other relay gives Relay-2 PERMISSION to trip faster IF it also detects a Zone-2 pickup. The permissive signal AND Zone-2 pickup means that Relay-2 will trip after a short communication time delay, which is usually less than 3 cycles.

Let’s look at a fault that is closer to Relay-2, but this time we’ll compare it to a standard distance protection scheme.

This fault is a mirror image of the previous one with the standard distance scheme on the top of the screen, and the POTT scheme shown on the bottom of the screen. Which elements will pick up in Relay-1 and 2?

This time Relay-2 sees a Zone-1 and Zone-2 pickup, while Relay-1 sees a Zone-2 pickup.

Relay-2 will trip instantaneously in both protection schemes because Zone-1 will always trip first because it has no intentional time delay.

Relay-1 should trip in 20-40 cycles in the normal protection scheme at the top of the screen because it has detected a Zone-2 fault, which means that the fault could be on the line the relay is supposed to protect, OR it could be on the line Relay-4 is installed to protect. Therefore, it is going to wait for Relay-4 to trip in case the fault is on Relay-4’s line. If Relay-4 doesn’t operate, Relay-2 will trip after a time delay.

The POTT scheme on the bottom of the screen will NOT wait for Relay-4 to operate because it is getting feedback from Relay-2 that indicates that the fault is on the line. If Relay-1 and Relay-2 both detect a Zone-2 fault, that means the fault should be in the overlapping region between the two relays, which is 100% of the line. Relay-2 will trip after a short communication time delay and remove the fault from the system.

A POTT scheme has pretty simple operating characteristics. If all the relays protecting a line detect a Zone-2 pickup, then the fault must be on the line; therefore, there is no reason to wait for the normal 20-40 cycles.

However, I bet the POTT schemes installed at your sites are more complicated than what I’ve described here because POTT schemes have a glaring weakness that we can demonstrate in this animation:

This animation can also be found on our website and depicts POTT schemes installed on parallel lines. Current flows from right to left under normal conditions. Then a fault occurs on one line.

Relay-1 detects a Zone-1 and Zone-2 fault, while Relay-2 detects a Zone-2 fault. The standard POTT scheme logic applies. Relay-1 will trip with no intentional time delay, and Relay-2 should trip after a short communication delay. It looks like a standard fault for Relay-1 and Relay-2, but let’s look closer at Relays 5 and 6.

Relay-5 detects a Zone-3 fault because there is a parallel path for current to flow into the fault and the fault appears to be behind Relay-5. Reverse zones are typically used to detect reverse faults in communication-assisted trip schemes and don’t trip anything, or they have long time delays of 60-120 cycles. Relay’s 1 and 2 are going to isolate the fault long before Relay-5’s Zone-3 gets a chance to trip anything. So far so good.

Relay-6 could detect a Zone-2 fault, which has a 20-40 cycle time delay, so it probably won’t have a chance to trip either. BUT… it will send a Permissive trip signal to Relay-5.

Now let’s see how the relays respond to this fault.

Relay-1 trips instantaneously as we predicted, but there was a source connected to Relay-3, which is now the primary source for fault current.

Relay-2 still detects a Zone-2 fault and had received permission to trip for the POTT scheme, so it’s primed to trip after a short communication delay.

The current suddenly changed direction in Relay-5, so it no longer detects a Zone-3 fault and it could now detect a Zone-2 fault. Zone-2 has a long time delay, so that shouldn’t be a problem because Relay-2 should be tripping momentarily.  BUT… Relay-6 was sending a POTT permissive before Relay-1 tripped. Relay-5 detects a Zone-2… AND it could still be receiving a POTT signal from Relay-6 because communication signals will always be slower than locally processed information, such as the Zone-2 pickup. This means Relay-5 could be primed for a POTT operation.

We now have a race between Relay-2 and Relay-5.  If Relay-5 wins that race, we could lose both lines for a fault on the one line, which could be a major problem.

This weakness is inherent in any over-reaching communication-assisted trip scheme, and most schemes add additional logic to minimize this problem as shown in this revised drawing.

Zone-3 is looking in the reverse direction and is connected to a new drop-out timer, which is connected to a NOT symbol on the POTT Scheme. All of the relays detect the same zones when all breakers are closed in this new hybrid scheme, and now:

• Relay-1 detects a Zone-1 Pickup and will trip instantaneously. Relay-1 also sends a POTT permissive trip signal to Relay-2 because it detects a Zone-2 pickup, and it did NOT detect a Zone-3 pickup in the last 5 cycles.
• Relay-2 should trip on POTT after a short communication delay because Relay-2 detects a Zone-2 pickup, AND it’s receiving a POTT permissive signal from Relay-1, AND it has NOT detected a Zone-3 pickup in the last 5 cycles.
• Relay-5 detects a Zone-3 reverse fault and sends a block signal to its POTT scheme.
• Relay-6 detects a Zone-2 pickup and sends a POTT permissive signal to Relay-5.

All the relays operate normally so far.

Breaker-1 operates with no intentional time delay, which will cause a sudden current reversal through relays 5 and 6. Relay-5 now detects a Zone-2 fault, and it could detect a POTT permissive because Relay-6 may not have had time to release its previous permissive signal yet. This was a problem in the old scheme, but Relay-5 detected a Zone-3 reverse fault a moment before, so the Drop Out timer will hold the Zone-3 input to the POTT scheme on. The NOT logic gate reverses the input and the POTT scheme cannot operate for 5 cycles, which should give Relay-6 plenty of time to release its POTT permissive signal.

We no longer have a race between Relays 2 and 5.  Relay-2 will operate after a short time delay and the fault will be isolated from the system without affecting the non-faulted line. The scheme’s weakness has been beaten into submission with logic!

The dirty little secret of communication-assisted trip schemes is they all have the same operating characteristics under normal operating conditions. All end-to-end tests should be performed on either side of each protective zone to make sure the protected line is isolated faster when a communication-assisted trip scheme is applied.

However, POTT schemes require additional tests that prove that the Zone-3 timer is appropriate for the application by simulating a phase reversal from both directions.

Thanks for watching this video. I hope you have some new insights into how Permissive Over-reaching Transfer Trip communication-assisted trip schemes work.

You can play with this animation, and more, by following the link on the screen.  You can also get more information about testing these schemes in The Relay Testing Handbook: End-To-End Testing using the other link in this video, or reading the description below.

As always, please like this video and subscribe to our channel to let Google know we have good stuff.  It helps us get noticed and allows us to keep providing free content like this with no ads.

Don’t forget to have fun out there.

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About the Author

Chris Werstiuk  

Chris is an Electrical Engineering Technologist, a Journeyman Power System Electrician, and a Professional Engineer. He is also the Author of The Relay Testing Handbook series and founder of Valence Electrical Training Services. You can find out more about Chris here .

Read More Articles:

How to Perform an In-Service Protective Relay Meter Test

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You have really carved out a place for yourself in Electrical Power System protection. Good on you sir, well done.

The lecture is useful! We hope you have more useful lectures! Thanks

Very interesting and helpful. Thank you.

Where can I find the previous 4 videos mentioned? I would like to watch all the videos for this series. Great info.

Thanks for the kind words.

You can find them on our YouTube channel here https://www.youtube.com/watch?v=s_IrsNHv4aQ&amp

Very good explanation and well illustrated. Great job!

Wow, such an amazing explanation. Kudos all the way from Brazil.