IRS waives the 60-day rollover requirement for an employee plan distribution

Plain-English summary

A taxpayer received a distribution from an employee plan and intended to roll part of it into an IRA. The taxpayer did not complete the rollover within 60 days because the taxpayer was caring for an ill parent and could not travel to the United States to open an IRA. The IRS found that these circumstances were beyond the taxpayer's reasonable control and waived the 60-day requirement under § 402(c)(3)(B). The ruling treated the transfer made to the rollover IRA as a rollover contribution, provided the other requirements of § 402(c) were met.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day rollover requirement for the employee plan distribution?
• Outcome: Approved, subject to the stated rollover conditions.
• Key authorities: IRC §§ 402(c), 402(c)(3)(A), and 402(c)(3)(B); Treas. Reg. § 1.401(a)(31); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
201405031
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 04 2013

Uniform Issue List: 402.00.00

T:EP:RA:T3

Legend:

Taxpayer A

Institution A

PlanA

IRA X

Amount A

Amount B

Financial Institution A

Financial Institution B

Country A

Dear ****,

This is in response to your request, dated October 15, 2012, as
supplemented by correspondence dated May 14, 2013, and October 17, 2013,
in which your authorized representative, on your behalf, requested a waiver of
the 60-day rollover requirement contained in section 402(c)(3)(A) of the Internal
Revenue Code (the “Code”).

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  201405031

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

Taxpayer A represents that he received a distribution from Plan A totaling
Amount A of which he elected to roll over Amount B. Taxpayer A asserts that his
failure to accomplish a rollover within the 60-day period prescribed by section
402(c)(3) of the Code was due to his obligation to care for his ailing father, whose
medical condition worsened around the time of the distribution and during the 60-
day period. Taxpayer A further represents that Amount B has not been used for
any other purpose.

Taxpayer A resigned from Institution A in May 2011. At the time he was
living in Country A, where he had requested assignment in 1996 so that he might
be close to his elderly and ailing parents. In connection with his resignation he
requested a distribution from Plan A. On June 23, 2011, Taxpayer A received a
wire transfer, of Amount A, into his account at Financial Institution A in the United
States. A 1099-R issued to Taxpayer A for 2011 shows a gross distribution of
Amount A and a taxable distribution of Amount B. The 1099-R shows the
Taxpayer A’s address as in Country A.

Taxpayer A represents that it was his intention to roll over the distribution
to an Individual Retirement Account (“IRA”) but it was not possible for him to
open an IRA in the United States without traveling there in person. As Taxpayer
A did not have an existing IRA account it was not possible to complete a direct
rollover by issuance of a check to the custodian of the IRA in compliance with
Treas. Reg. § 1.401(a)(31).

Taxpayer A represents that he intended to travel to the United States
within 60 days of the distribution to open an IRA account and roll over the
distribution but was prevented from doing so because of the need to care for his
elderly parents whose condition worsened around the time of the distribution.
Taxpayer A has submitted documentation showing that his father suffered a
stroke in May 2011 for which he was hospitalized. The stroke aggravated other
medical conditions such that Taxpayer A was unable to leave him alone for an
extended period.

In May 2012, Taxpayer A was able to travel to the United States and on
May 31, 2012 transferred Amount B to a rollover IRA (“IRA X”) with Financial
Institution B.

Based on the facts and representations, you request a ruling that the
Internal Revenue Service (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 B.

201405031

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 that the Secretary may waive
the 60-day requirement under section 402(c)(3)(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.

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

The information presented and documentation submitted is consistent with
Taxpayer A’s assertion that his failure to accomplish a timely rollover was a result
of his inability to travel to the United States within 60 days to accomplish the
rollover because of a need to care for his parents who were ill and particularly
because of the stroke suffered by his father just prior the start of the 60 day roll
over period. Taxpayer did not have an existing IRA in the United States and it
was not possible to open an IRA in Country A.

Therefore, pursuant to section 402(c)(3)(B) of the Code, the Service
waives the 60-day rollover requirement with respect to the distribution to you of
Amount B from Plan A: Provided all other requirements of section 402(c) of the
Code, except the 60-day rollover requirement, were met with respect to the
transfer of Amount B to IRA X on May 31, 2012, such transfer will be considered
a rollover contribution within the meaning of section 402(c)(1).

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

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201405031
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 is directed solely to the Taxpayer A who requested it. Section
6110(k)(3) of the Code provides that it may not be used or cited as precedent.

If you wish to inquire about this ruling, please contact *, (ID# * at
*. Please address all correspondence to SE:T:EP:RA:T3.

Sincerely yours,

Laura B. Warshawsky, Manager,
Employee Plans Technical Group 3

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

cc:
cc: [illegible]