Rollover waiver denied when family issues did not cause delay

Plain-English summary

A retiree received a lump-sum distribution after missing an appointment to discuss his benefit options and then missed the 60-day rollover deadline. He cited family responsibilities and a medical issue that had caused him to miss the earlier appointment. The IRS found that he had no specific health issue during the rollover period and that the family circumstances existed before the distribution without appreciably increasing. Because the materials did not show that any recognized waiver factor caused the missed deadline, the IRS declined to waive the 60-day requirement.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover deadline for the plan distribution?
• Outcome: Denied
• Key authorities: IRC §§ 401(a)(31) and 402(c)(3); Rev. Proc. 2003-16

Full text (IRS public release)

201502021

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 16 2014

Uniform Issue List: 402.03-00

Legend:
Taxpayer A =
Plan B =
Employer C =
Amount 1 =

Dear

This is in response to your request dated February 24, 2014, as supplemented by
correspondence dated May 10, 2014 and September 2, 2014, in which you request a
waiver of the 60-day rollover requirement contained in section 402(c)(3) of the Internal
Revenue Code (“Code”).

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

Taxpayer A represents that he received a distribution of Amount 1 from Plan B.
Taxpayer A asserts that his failure to accomplish a rollover within the 60-day period
prescribed by section 402(c)(3) was due to significant family and work related issues
which impaired his ability to complete the rollover within 60-days.

Taxpayer A participated in Plan B with Financial Institution C. Taxpayer A represents
that he retired from Employer C on June 1, 2012, and began receiving a monthly
annuity benefit. In addition to the monthly benefit, Taxpayer A was scheduled to receive
an additional benefit that could be applied to his annuity, rolled over to another
retirement plan or received in a lump-sum payment. In October, 2012, Plan B provided

201502021

Taxpayer A written communication concerning this benefit that fully explained Taxpayer

A's options. Taxpayer A represents that because of a medical issue at the time, he

missed a scheduled appointment with a counselor of Plan B that would more fully

explain his options concerning this additional benefit. Taxpayer A never rescheduled

the appointment. As a result of not electing any of the options presented to Taxpayer A,
Plan B issued a lump-sum payment of Amount 1 on December 6, 2012. In March,

2013, Taxpayer A was advised by his tax preparer that he had missed the 60-day ;
rollover period. Taxpayer A tried to return the check to Plan B but was told that since

federal withholding was deducted that the distribution could not be reversed.

Taxpayer A indicated that during the 60-day rollover period he had no specific health
issues that prevented a rollover but represents he was caring for his spouse and
provided support for a grandchild with ongoing medical issues. However, these issues
were present prior to the distribution and did not significantly increase during the 60-day
period.

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 1.

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)(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 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) of the Code.

201502021

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

Section 1.401(a)(31)-1 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.

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 Service has the authority to waive the 60-day rollover requirement for a distribution
from a qualified retirement plan where the individual failed to complete a rollover to
another qualified plan or IRA within the 60-day rollover period but was prevented from
doing so because of one of the factors enumerated above in Revenue Procedure 2003-

16. In this instance, however, the Service finds that the documentation and materials
    provided by Taxpayer A do not demonstrate how any of these factors resulted in his
    failure to accomplish a timely rollover of Amount 1. Taxpayer A represented that his
    inability to complete a rollover of Amount 1 was caused by his missing a scheduled
    appointment with Plan B’s counselor and significant family issues during the 60-day
    rollover period. However, these issues existed prior to the distribution and did not
    appreciably increase during the 60-day period.

Therefore, the Service declines to waive the 60-day rollover requirement with respect to
the distribution of Amount 1 from Plan B.

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.

A copy of this letter is being sent to your authorized representative pursuant to a Power
of Attorney on file in this office.

201502021

If you wish to inquire about this ruling, please contact (ID ) at
. Please address all correspondence to SE:T:EP:RA:T1.

Sincerely,
Carlton A. Watkins, Manager

Employee Plans Technical Group 1

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

CC: