PLR 1346013: IRS waives the 60-day rollover deadline for an unrequested inherited-plan distribution

Plain-English summary

A beneficiary received an unrequested distribution from a deceased spouse's qualified retirement plan and missed the 60-day rollover deadline. The beneficiary said the plan did not provide the required notice about the distribution, its tax consequences, or rollover rights, and the funds remained unused in a regular account. The IRS waived the deadline and gave the beneficiary 60 days from the ruling date to contribute the specified amount to a rollover IRA, assuming the other rollover requirements are met. The ruling did not authorize a rollover of amounts required to be distributed under the minimum-distribution rules.

Ruling snapshot

• Question: May the beneficiary receive a waiver of the 60-day rollover requirement under IRC § 402(c)(3)(B)?
• Outcome: Approved, 60-day waiver granted
• Key authorities: IRC §§ 401(a), 401(a)(9), 402(c), 402(c)(3), 402(c)(4), and 402(f); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE 201346013

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

AUG 19 2013

Uniform Issue List: 402.08-00 SE:T:EP:RA:T2

Legend:
Taxpayer = ***

Spouse = ***

Financial Institution = ***

Amount A = ***
Amount B = ***
Amount C = ***

Plan X = ***

Dear * * *:

This is in response to your request received October 4, 2012, as supplemented by
correspondence received November 15, 2012, February 8, 2013, March 4, 2013, March
14, 2013, July 9, 2013, and July 18, 2013, 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 penalties of perjury
in support of the ruling requested.

Taxpayer represents that she received a distribution from her deceased Spouse's
account in Plan X. Taxpayer asserts that her failure to accomplish a rollover of the
distribution within the 60-day period prescribed by section 402(c)(3) was due to the fact

201346013

that she had not requested the distribution and did not receive the statutorily required
notice of the tax consequences and her rollover rights regarding the distribution.
Taxpayer further represents that the distribution has not been used for any other
purpose.

Taxpayer was the beneficiary of Spouse's interest in Plan X, which is represented to be
a qualified retirement plan under section 401(a) of the Code. Pursuant to Plan X's
terms, Plan X made a mandatory distribution of Spouse's interest in Plan X to Taxpayer
on May 16, 2011, one year after Spouse's death. Taxpayer received Amount B, after
Plan X withheld Amount C for federal withholding taxes. Taxpayer had not requested
the distribution and represents that she did not receive a notice from Plan X explaining
the distribution and its tax consequences and her rollover rights.

Upon receiving the unrequested distribution of Amount B from Plan X, Taxpayer gave
Amount B to Financial Institution, with whom Spouse and Taxpayer had other non-
retirement accounts. Taxpayer represents that she intended to maintain Amount A in a
manner consistent with the tax treatment such interest received in Plan X and had no
intent or expectation of receiving a distribution from Plan X. Because the distribution
was not requested and she did not receive the proper notice regarding it, she did not
know how to instruct Financial Institution on what to do with the funds received.
Financial Institution simply deposited Amount B in Taxpayer's regular non-retirement
account on May 27, 2011. Taxpayer has not used the funds and Amount B remains in
Taxpayer's non-retirement account.

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

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. 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 sections 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).

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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) of the Code (regarding required distributions).

3

Section 402(f) of the Code provides that a plan administrator, before making a
distribution that is eligible for rollover, shall provide a written explanation to the recipient
of the tax consequences of the distribution and the recipient's right to rollover the
distribution within 60 days.

Revenue Procedure 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 is consistent with
her assertion that her failure to accomplish a timely rollover was caused by the fact that
she had not requested the distribution and did not receive the statutorily required notice
of the tax consequences and her rollover rights regarding the distribution.

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 A from Plan X.
Taxpayer 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
402(c)(3), except the 60-day requirement, are met with respect to such contribution, the
contribution of Amount A will be considered a rollover contribution within the meaning of
section 402(c)(3).

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

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.

4 201346013

Pursuant to the power of attorney on file with this office, a copy of this letter ruling is
being sent to your authorized representative. If you wish to inquire about this ruling,
please contact * *% at () _**** Please address all correspondence

to SE:T-:EP:RA:T2.

Sincerely yours,

Employee Plans Technical Group 2
Enclosures:

Deleted copy of ruling letter
Notice of Intention to Disclose

cc: