PLR 200650024: Employer's incorrect rollover advice supports IRA deadline waiver

Plain-English summary

A taxpayer withdrew SIMPLE IRA savings accumulated over four years and followed her new employer's human resources advice to roll them into its retirement plan. She submitted the rollover forms within 60 days, but the plan returned the money after the deadline because it did not accept SIMPLE IRA rollovers. She represented that the funds had not been used for another purpose. The IRS accepted that inaccurate employer advice caused the missed deadline and waived the section 408(d)(3) time limit. It allowed 60 days from issuance of the ruling to contribute the amount to a rollover IRA, subject to every other rollover requirement.

Ruling snapshot

• Question: Does reliance on incorrect employer advice justify a waiver after its plan rejects a SIMPLE IRA rollover?
• Outcome: Approved: 60 days from issuance to contribute the amount to a rollover IRA, subject to other requirements.
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16.

Full text (IRS public release)

Uniform Issue List: 408.03-00 200650024

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

SEP 20 2006

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SE:T:EP:RA:T4

Legend:

Taxpayer A =

IRA X =
[Simple IRA]

Amount A = $

Plan M =

Date 1 =

Dear :

This is in response to your request dated , in which you request a waiver of the 60-day rollover requirement contained in section 408(d)(3) of the Internal Revenue Code (the “Code”).

The following facts and representations have been submitted under penalty of perjury in support of the ruling requested:

Taxpayer A, age , represents that she received a distribution of Amount A from IRA X on Date 1 and deposited Amount A in her bank account. Amount A represented accumulations during four years of participation in IRA X. Taxpayer A asserts that her failure to accomplish a rollover within the 60-day period prescribed

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by section 408(d)(3) of the Code was due to her reliance on inaccurate information provided to her by the human resources representative of her new employer that maintains Plan M.

On , Taxpayer A was laid off from her employer where she participated in IRA X. During 2005, Taxpayer A started her new employment with a company that maintains Plan M. On , during the 60 day rollover period, Taxpayer A filled out the forms to rollover Amount A into Plan M in accordance with advice of a human resources representative of her new employer. On , which was after the 60 day rollover period, Taxpayer A received a check for Amount A from the Trustee of Plan M with a note stating that Plan M does not accept Simple IRA rollovers. Taxpayer A further represents that Amount A has not been used for any other purpose.

Based on the above facts and representations, Taxpayer A requests a ruling that the Internal Revenue Service waive the 60-day rollover requirement contained in section 408(d)(3) of the Code with respect to Amount A.

Section 408(d)(1) of the Code provides that, except as otherwise provided in section 408(d), any amount paid or distributed out of an IRA shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72 of the Code.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code does not apply to any amount paid or distributed out of an IRA to the individual for whose benefit the IRA is maintained if—

(i) the entire amount received (including money and any other property) is paid into an IRA for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is paid into an eligible retirement plan (other than an IRA) for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received, except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross income (determined without regard to section 408(d)(3)).

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Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not apply to any amount described in section 408(d)(3)(A)(i) received by an individual from an IRA if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in section 408(d)(3)(A)(i) from an IRA, which was not includible in gross income because of the application of section 408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for partial rollovers.

Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code where failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to such requirement. Only distributions that occurred after December 31, 2001, are eligible for the waiver under section 408(d)(3)(I) of the

Code.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I), the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3) the use of the amount distributed (for example, in the case of payment by check, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The information presented and documentation submitted by Taxpayer A is consistent with her assertion that her failure to accomplish a timely rollover was caused by her reliance on inaccurate information provided to her by the human resources representative of her new employer that maintains Plan M.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby waives the 60-day rollover requirement with respect to the distribution of Amount A. Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to contribute Amount A into a rollover IRA. Provided all other requirements of section 408(d)(3) of the Code (except the 60-day requirement) are met such contribution will be considered a rollover contribution within the meaning of section 408(d)(3) of the Code.

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No opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the Code or regulations, which

may be applicable thereto.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

If you have any questions please contact , at

Sincerely yours,

Ada Perry

for Donzell Littlejohn, Manager
Employee Plans Technical Group 4

Enclosures:
Deleted copy of this letter
Notice of Intention to Disclose, Notice 437