IRS waives the 60-day deadline for a partial pension rollover

Plain-English summary

The IRS waived the 60-day rollover deadline for part of a pension distribution received by a medically disabled taxpayer. The taxpayer said a medical condition, continuous anxiety, a lost check, and dependence on a family member prevented a timely rollover. The IRS gave the taxpayer 60 days from the ruling letter's issuance to contribute the specified amount to another qualified plan or a rollover IRA. The waiver applied only to the partial rollover described in the ruling and remained subject to the other requirements of IRC § 402(c)(3).

Ruling snapshot

• Question: Could the IRS waive the 60-day deadline for a partial pension rollover delayed by the taxpayer's medical condition and disability?
• Outcome: Approved
• Key authorities: IRC § 402(c)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201233021

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 21 2012

U.I.L. 402.08-00

[illegible handwritten annotation]

XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXXXXXX
Plan X = XXXXXXXXXXXXXXX
Amount C = XXXXXXXXXXXXXX
Amount D = XXXXXXXXXXXXXXX
Date 1 = XXXXXXXXXXXXXXX

Dear XXXXXXXXX:

This is in response to your letter dated xxxxxxxxxx, as supplemented by
correspondence dated xxxxxxxxxxxx, and xxxxxxxxxx, submitted on your behalf
by your authorized representative, in which you request a waiver of the 60-day
rollover requirement contained in section 402(c)(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 51, represents that she received a distribution from Plan X
totaling Amount C on Date 1. Taxpayer A asserts that her failure to accomplish a
rollover of Amount D, a portion of Amount C, within the 60-day period prescribed
by section 402(c)(3) of the Code was due to her medical condition which
impaired her ability to accomplish a timely rollover.

Taxpayer A is medically disabled and retired on disability due to her medical
condition. Taxpayer A requested and received a distribution from Plan X because
she thought it would be to her advantage to have extra funds available in case of

medical emergency. However after Taxpayer A received the distribution from
Plan X, she realized that she did not need all of the extra money for her medical
expenses because she was receiving worker compensation disability benefits
and her medical insurance covered most of her medical expenses. Accordingly,
within the 60-day rollover period, she tried to return Amount D to Plan X, but Plan
X’s sponsor would not allow her to do so.

Taxpayer A represents that because of her continuous anxiety, together with her
medical condition, she lost the original check of Amount C. Taxpayer A
requested a replacement check and tried, after receiving the replacement check,
to roll it over but could not complete the rollover in time due to her disability,
medical condition and dependence on a family member.

Based on the above facts and representations, Taxpayer A requests a ruling that
the Internal Revenue Service (the Service) waive the 60-day rollover requirement
contained in section 402(c)(3) of the Code with respect to the distribution of
Amount D ( a partial rollover of Amount C).

Section 402(c) of the Code provides that if any portion of the balance to the credit
of an employee in a qualified trust is paid to the employee in an eligible rollover
distribution, and the distributee transfers any portion of the property received in
such distribution to an eligible retirement plan, and in the case of a distribution of
property other than money, the amount so transferred consists of the property
distributed, then such distribution (to the extent transferred) shall not be included
in gross income for the taxable year in which paid. Section 402(c)(3)(A) of the
Code states that such rollover must be accomplished within 60 days following the
day on which the distributee received the property. An individual retirement
account (IRA) constitutes one form of eligible retirement plan.

Section 402(c)(3)(B) of the Code provides, in relevant part, that the Secretary
may waive the 60-day requirement under section 402(c) where the 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 402(c)(3)(B) of the Code.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, (January 27, 2003), provides that in
determining whether to grant a waiver of the 60-day rollover requirement
pursuant to section 402(c)(3) of the Code, 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.

201233021

Page 3

The information presented and documentation submitted is consistent with
Taxpayer A’s assertion that her failure to accomplish a timely rollover of Amount
D was due to her medical condition.

Therefore, pursuant to section 402(c)(3)(B) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount
D. Taxpayer A is granted a period of 60 days from the issuance of this ruling
letter to contribute Amount D into another qualified plan or a rollover IRA.
Provided all other requirements of section 402(c)(3) of the Code, except the 60-
day requirement, are met with respect to such contribution, Amount D will be

considered a rollover contribution within the meaning of section 402(c)(3) of the
Code.

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

A copy of this letter is being sent to your authorized representative pursuant to a
power of attorney on file in this office.

If you wish to inquire about this ruling, please contact XXXXXXXXXXXXXXXXXXX,
SE:T:EP:RA:T3, at XXXXXXXXXXXX.

Sincerely yours,

Laura B. Warshawsky, Manager
Employee Plans Technical Group 3

Enclosures:
Deleted Copy of letter ruling
Notice of Intention to Disclose

Cc: XXXXXXXXXXXXXXXXXXX.