IRS waives the rollover deadline after a taxpayer missed a distribution notice while abroad

Plain-English summary

A retired employee was outside the country when an employer distributed the employee's vested retirement account and mailed the distribution check. The employee did not learn of the distribution until after the 60-day rollover period had expired, then deposited the net check into an IRA within seven days of opening the mail. The IRS waived the 60-day requirement for the distribution and treated the contributions of the withheld amount and the net amount as rollovers, subject to the other requirements of section 402(c). The ruling did not authorize rollovers of amounts required to be distributed under section 401(a)(9).

Ruling snapshot

• Question: Could the IRS waive the 60-day rollover requirement because the taxpayer was abroad and did not receive the distribution notice?
• Outcome: Approved, subject to the ruling's conditions.
• Key authorities: IRC §§ 402(c)(1), 402(c)(3), 402(c)(4), and 401(a)(9)

Full text (IRS public release)

201407026

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 19 2013

T:EP:RA:T3

U.I.L. 402.08-00
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
Legend:
Taxpayer A = XXXXXXXXXXXXXXXXX
Plan X = XXXXXXXXXXXXXXXXX
IRA Y = XXXXXXXXXXXXXXXXX
Employer N = XXXXXXXXXXXXXXXXX.
Amount A = XXXXXXXXXXXXXXXXX
Amount B = XXXXXXXXXXXXXXXXX
Amount C = XXXXXXXXXXXXXXXXX
Company O = XXXXXXXXXXXXXXXXX

Dear XXXXXXX:

This is in response to your request dated June 12, 2013, as supplemented by a
letter dated July 11, 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 penalty of
perjury in support of the ruling requested.

2 201407026

Taxpayer A represents that he received a distribution from Plan X totaling
Amount A. 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 because he was
out of the country and unaware that a distribution was made from Plan X until
expiration of the 60- day rollover period.

Taxpayer A retired from employment with Employer N in 2009. While employed
with Employer N, Taxpayer A was a participant in Plan X. Taxpayer A represents
that on January 31, 2013, Employer N sent a letter to Taxpayer A’s home
address advising that his vested account balance was required to be distributed
because Taxpayer A was over age 65. Taxpayer A was given 60 days from the
date of the letter to notify Employer N of the financial institution to rollover the
proceeds into an IRA. Taxpayer A further represents that Employer N did not
attempt to notify him by any other means (email or telephone).

On April 4, 2013, Company N’s plan administrator, Company O, mailed a check
in the net amount of Amount C (Amount A minus Amount B, the federal and state
withholdings) to Taxpayer A’s home address.

Taxpayer A was out of the country from January 13, 2013, to June 3, 2013, and
did not receive any of his mail during this time, and was unaware that Employer
N was going to distribute the funds during this period. When Taxpayer A returned
home on June 3, 2013, he discovered the check and the correspondence from
Employer N. Taxpayer A represents that he would have rolled over the entire
amount of the distribution into an IRA if he had known of the distribution.
Taxpayer A deposited the check totaling Amount C into IRA Y on June 10, 2013,
within seven days from the date he opened the mail containing the distribution
check.

Based on the above facts and representations, you request a ruling that the
Internal Revenue Service waive the 60-day rollover requirement with respect to
the distribution of Amount A.

Section 402(c)(1) 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) 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.

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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.

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.

The information presented and documentation submitted by Taxpayer A is
consistent with his assertion that his failure to accomplish a timely rollover was
because he was out of the country and unaware that a distribution was made
from Plan X until after the expiration of the 60-day rollover period.

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. With respect to Amount B, provided all other requirements of
section 402(c)(3) of the Code, except the 60-day requirement, are met with
respect to such contribution, the contribution of Amount B into an IRA will be
considered a rollover contribution within the meaning of section 402(c)(3) of the
Code. With respect to Amount C, since Amount C has already been contributed
to IRA Y, provided all other requirements of section 402(c)(3) of the Code, except
the 60-day requirement were met, the contribution of Amount C into IRA Y on
June 10, 2013, will be considered a rollover contribution within the meaning of
section 402(c)(3) of the Code.

This ruling does not authorize the rollover of amounts that are required to be
distributed by 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
which may be applicable thereto.

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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.

If you wish to inquire about this ruling, please contact XXXXXXXXXXX, XXXXXXXXX, at
XXXXXXXXXXXXXXXXXX Any correspondence should be addressed to
SE:T:EP:RA:T3.
Sincerely yours,
Laura B. Warshawsky, Manager
Employee Plans Technical Group 3
Enclosures:

Deleted Copy of letter ruling
Notice of Intention to Disclose