Disability justified waiver of 60-day rollover deadline

Plain-English summary

A taxpayer took a retirement-plan distribution to cover anticipated medical expenses but could not complete a rollover within 60 days. Medical documentation supported that chronic pain from an automobile accident left him nonambulatory during the rollover period, and his rural location prevented him from traveling to the credit union to complete the necessary paperwork. The funds remained in his savings account. The IRS waived the deadline and granted 60 days from the ruling’s issuance to contribute the specified amount to a rollover IRA.

Ruling snapshot

• Request: Waive the 60-day rollover deadline for a qualified-plan distribution
• Outcome: Approved; 60 days from the ruling’s issuance to contribute the specified amount to a rollover IRA
• Key authorities: I.R.C. § 402(c)(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

201543022

U.I.L 402.08-00                                      JUL 29 2015

XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX                                        T: EP: RA: T3

Legend:

Taxpayer A = XXXXXXXXXXXX
Plan X = XXXXXXXXXXXX
Company C = XXXXXXXXXXXX
Credit Union D = XXXXXXXXXXXX
Amount 1 = XXXXXXXXXXXX
Amount 2 = XXXXXXXXXXXX
Amount 3 = XXXXXXXXXXXX
Amount 4 = XXXXXXXXXXXX
Date 1 = XXXXXXXXXXXX
Date 2 = XXXXXXXXXXXX

Dear xxxxxxxxx:

This letter is in response to your request dated August 26, 2014, as
supplemented by correspondence dated October 13, 2014, March 19, 2015,
and June 9, 2015, 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                                               201543022

Taxpayer A represents that on Date 1, he received a distribution from Plan X
totaling Amount 2 (Amount 1 minus Amount 3 withholding) to cover anticipated
medical expenses. 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 physical disability.

Taxpayer A represents that he suffers from chronic pain as a result of an
automobile accident during 2011 and is retired on disability from Company C.
Medical documentation submitted attests to Taxpayer A’s physical disability.
Taxpayer A represents that during the 60-day rollover period he was non
ambulatory and, as a result, he was unable to rollover Amount 4 back into Plan
X. Taxpayer A further represents that he lives in a rural area and was unable to
commute to Credit Union D to complete the necessary documents and return the
distribution within the 60-day rollover period. On Date 2, during the 60-day
rollover period, Amount 2 was deposited and remains in Taxpayer A’s savings
account with Credit Union D.

Based on the foregoing facts and representations, you request that the Internal
Revenue Service (“Service”) waive the 60-day rollover requirement contained in
section 402(c)(3) of the Code with respect to Amount 4.

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.

Section 402(c)(8)(B) of the Code provides that an eligible retirement plan
includes (i) an eligible retirement account described in section 408(a), (ii) an
individual retirement annuity described in section 408(b) (other than an
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) which is maintained by an eligible employer described in section
457(e)(1)(A), and (vi) an annuity contract described in section 403(b).

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

3                                               201543022

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, provides that in determining whether to
grant a waiver of the 60-day rollover requirement pursuant to section 402(c)(3),
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
due to his disability.

Therefore, pursuant to section 402(c)(3) of the Code, the Service hereby waives
the 60-day rollover requirement with respect to the distribution of Amount 4 from
Plan X. Taxpayer A is granted a period of 60 days from the issuance of this letter
ruling to contribute Amount 4 into a rollover IRA. 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 4 will be considered a
rollover contribution within the meaning of section 402(c)(3) of the Code.

No opinion is expressed as to the tax treatment of the transactions 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.

If you have any questions concerning this letter, please contact xxxxxxxxxx,
xxxxxxxxxxxxxx, at xxxxxxxxxxxxxx. All correspondence should be addressed to
SE:T EP RA:T2.

Sincerely yours,



Sherri M. Edelman, Manager
Employee Plans Technical Group 2

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