PLR 1311041: IRS waives the 60-day rollover deadline after checks were mailed to the wrong address

Plain-English summary

The IRS waived the 60-day rollover requirement for a taxpayer whose plan distribution checks were mailed to an incorrect address by a financial institution. The taxpayer retrieved the checks shortly after the deadline and deposited them into an IRA. The IRS treated the contribution as a rollover contribution if the other requirements of section 402(c) were met.

Ruling snapshot

• Question: What relief did the IRS grant under the applicable rollover or pension funding rules?
• Outcome: Approved.
• Key authorities: IRC § 402

Full text (IRS public release)

201311044

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 17 2012
Uniform Issue List: 402.00-00

TEP RA T 3

Legend:
Taxpayer A ~

Plan X =
IRA Y =

Financial Institution P =

Financial Institution M
Amount M =
Amount N =

Amount O =

Dear

This is in response to your request dated March 7, 2012, as supplemented by
correspondence dated September 20, 2012, in which you request a waiver of the 60-
day rollover requirement under 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, represents that she received a distribution from Plan X, totaling Amount O.
Taxpayer A_asserts that her failure to accomplish a rollover within the 60-day period

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prescribed by section 402(c)(3) of the Code was due to an error by Financial
Institution P.

On December 20° , Taxpayer A requested a lump sum distribution from Plan X.
Taxpayer A intended to rollover Amount O (Amounts M and N) into a rollover Individual
Retirement Account (IRA) with Financial Institution M. Taxpayer A requested that
Financial Institution P issue checks payable to Financial Institution M as Custodian FBO
Taxpayer A. A check from Plan X was issued on January , 20 __, totaling Amount M
payable to Financial Institution M as custodian FBO Taxpayer A and a second check
was issued on January ,20_ , for Amount N. Both checks were mailed to Taxpayer
A’s parent’s summer home. Taxpayer A took appropriate steps to follow up with the
Plan X administrator to inquire about the overdue checks and finally learned that the
checks were mailed to an incorrect address by Financial Institution P.

Taxpayer A was able to retrieve the Plan X checks on March . ,20__, shortly after the
end of the 60-day rollover period and on the same day brought the checks to Financial
Institution M where they were deposited into IRA Y.

Based on the facts and representations, you request a ruling that the Internal Revenue
Service waive the 60-day rollover requirement contained in section 402(c)(3) of the
Code with respect to the distribution of Amount O.

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 includible in gross income for the
taxable year in which paid. Section 402(c)(3)(A) states that such rollover must be
accomplished within 60-days following the day on which the distributee received the
property distributed. An individual retirement account (IRA) constitutes one form of
eligible retirement plan.

Section 402(c)(4) of the Code provides that an eligible rollover distribution shall not
include any distribution to the extent such distribution is required under section
401(a)(9).

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.

29131

Page 3

Section 401(a)(31) provides the rules for governing “direct transfers of eligible rollover
distributions”.

Section 1.401(a)(31) of the Income Tax Regulations, Question and Answer-15,
provides, in relevant part, that an eligible rollover distribution that is paid to an eligible
retirement plan in a direct rollover is a distribution and rollover, and not a transfer of
assets and liabilities.

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.

The information presented and documentation submitted by Taxpayer A is consistent
with her assertion that her failure to accomplish a timely rollover was due to an error by
Financial Institution P.

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 O. The
contribution of Amount O into IRA Y will be considered a rollover contribution within the
meaning of section 402(c)(3) of the Code, provided all other requirements of section
402(c)(3) of the Code, except the 60-day requirement, are met with respect to such
contribution.

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.

This ruling does not authorize the rollover of amounts that are required to be distributed
by section 401(a)(9) of the Code.

104 &

201311041

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If you have any questions, please contact

SE:T:EP:RA:T:3
Sincerely yours,
Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:

Deleted Copy of Ruling Letter
Notice of Intention to Disclose