PLR 1343029: IRS waives the 60-day rollover deadline after a financial institution error

Plain-English summary

After leaving employment, a taxpayer received a distribution from an employee plan and intended to roll the entire amount into an IRA or another qualified plan. The plan administrator correctly rolled over most of the distribution, but an employee mistakenly transferred the shares making up Amount 3 to a non-IRA account. The IRS waived the 60-day rollover requirement under IRC § 402(c)(3)(B) because the paperwork error was attributable to the financial institution and the shares remained unused. The taxpayer received 60 days from the ruling date to contribute Amount 3 to an IRA, subject to the other rollover requirements.

Ruling snapshot

• Question: May the IRS waive the 60-day rollover requirement when a financial institution's paperwork error sends part of a plan distribution to a non-IRA account?
• Outcome: Approved. The IRS waived the deadline for Amount 3 under IRC § 402(c)(3)(B).
• Key authorities: IRC §§ 72, 401(a), 401(a)(9), 402(a), 402(c), 403(a), 403(b), 408(a), 408(b), 457(b), 457(e)(1)(A), 501(a), 6110(k)(3); Rev. Proc. 2003-16

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 31 2013

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Uniform Issue List: 402.00-00

T:EP:RA:T1

Legend

Taxpayer A =
Plan B =
IRA Account C =
Account D =
Financial Institution E =
Company F =
Financial Institution G =
Amount 1 =
Amount 2 =
Amount 3 =

Dear:

This is in response to your request dated December 15, 2012, as supplemented by
correspondence received on May 21, 2013, in which you request a waiver of the 60-day
rollover requirement contained in section 402(c)(3)(A) 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 after terminating employment with his employer, Taxpayer A
received a total distribution Amount 1 from Plan B in 20 . Taxpayer A asserts that his
failure to accomplish a rollover of Amount 3, a portion of Amount 1, within the 60-day

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period prescribed by section 402(c)(3) of the Code was due to an error by an employee
of Financial Institution G which resulted in Amount 3 being deposited into Account D, a
non-IRA account.

Over the years, Taxpayer A met with officials from Financial Institution G, which
provides financial services to Plan B, to review his investments in Plan B. Taxpayer A
maintained two accounts under Plan B. The assets in one account were invested in
shares of Company F, a real estate investment company, and the assets in the other
account were invested in a brokerage account.

On December 9, 20 , Taxpayer A completed a form requesting a total distribution from
Plan B to be made by check payable to an IRA or qualified plan. On January 24, 20 ,
and February 1, 20 , sums totaling Amount 2 were distributed from Plan B and directly
rolled over into IRA Account C maintained by Financial Institution E. Subsequently,
Company F supplied a separate form to be used for rolling over the shares that were
held in Taxpayer A's account under Plan B. Taxpayer A represents that an employee of
Financial Institution G checked the box on the transfer form indicating that Taxpayer A's
shares were to be transferred to an “Individual Account,” rather than specifying an IRA
account on the form. On May 4, 20__ , the shares equal to Amount 3 were transferred
from Plan B to a non-IRA account, Account D, with Company F. Taxpayer A discovered
the error when he received a 20 Form 1099-DIV from Company F.

Taxpayer A submitted documentation from Financial Institution G stating that the
paperwork for the rollover was processed incorrectly. Box 7 of the Form 1099-R
received from Plan B indicates a direct rollover with respect to total distribution Amount

1. The shares remain in Account D and have not been used for any other purpose.

Based on the facts and representations, you request that the Service waive the 60-day
rollover requirement contained in section 402(c)(3)(A) of the Code with respect to the
distribution of Amount 3 from Plan B.

Section 402(a)(1) of the Code provides that except as otherwise provided in this
section, any amount actually distributed to any distributee by any employees' trust
described in section 401(a) which is exempt from tax under section 501(a) shall be
taxable to the distributee, in the taxable year of the distributee in which distributed, in
the manner provided under section 72 (relating to annuities).

Section 402(c) of the Code provides rules governing rollovers of amounts from exempt
trusts to eligible retirement plans, including IRAs.

Section 402(c)(1) of the Code provides, generally, that if any portion of an eligible
rollover distribution from a qualified employees trust is paid to the employee in an
eligible rollover distribution and the employee 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

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property distributed, such distribution (to the extent so transferred) shall not be
includible in gross income for the taxable year in which paid.

Section 402(c)(2) of the Code provides that the maximum amount of an eligible rollover
distribution to which paragraph (1) applies shall not exceed the portion of such
distribution which is includible in gross income (determined without regard to paragraph
(1)).

Section 402(c)(3)(A) of the Code provides, generally, that section 402(c)(1) shall not
apply to any transfer of a distribution made after the 60th day following the day on which
the distributee received the property distributed.

Section 402(c)(3)(B) of the Code provides that the Secretary may waive the 60-day
requirement under subparagraph (A) 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 occur after December 31, 2001, are eligible for the waiver under
section 402(c)(3)(B).

Section 402(c)(4) of the Code defines “eligible rollover distribution” as any distribution to
an employee of all or a portion of the balance to the credit of an employee in a qualified
trust, except that such term shall not include:

(A) any distribution which is one of a series of substantially equal periodic
payments (not less frequently than annually) made --

(i) for the life (or life expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and the employee's designated beneficiary, or

(ii) for a specified period of 10 years or more,

(B) any distribution to the extent the distribution is required under section
401(a)(9), and

(C) any distribution which is made upon hardship of the employee.

Section 402(c)(8) of the Code defines eligible retirement plan as (i) an individual
retirement account described in section 408(a); (ii) an individual retirement annuity
described in section 408(b) (other than endowment contract); (iii) a qualified trust; (iv)
an annuity plan described in section 403(a); (v) an eligible deferred compensation plan
described in section 457(b) maintained by an eligible employer as described in section
457(e)(1)(A); and (vi) an annuity contract described in section 403(b).

Revenue Procedure 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 402(c)(3)(B) 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

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payment by check, whether the check was cashed); and (4) the time elapsed since the
distribution occurred.

The information and documentation provided by Taxpayer A are consistent with
Taxpayer A's assertion that his inability to complete a timely rollover of Amount 3 was
due to the failure of an employee of Financial Institution G to correctly process the
paperwork required for a timely rollover of Amount 3 into an IRA, which resulted in
Amount 3 being deposited into Account D, a non-IRA account.

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 3 from Plan B.
Taxpayer A is granted a period of 60 days from the issuance of this ruling letter to
contribute Amount 3 to an IRA maintained by a bank or approved non-bank trustee or
custodian. Provided all other requirements of section 402(c), except the 60-day
requirement, are met with respect to such contribution, the contributed amounts will be
considered a rollover contribution within the meaning of section 402(c).

Please note that this ruling does not authorize the rollover of minimum required
distributions under section 401(a)(9) 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 that may be
applicable hereto.

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

If you have any questions regarding this ruling, you may contact

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

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