Financial-institution procedures support IRA rollover waiver

Plain-English summary

An IRA owner received two distribution checks and promptly sent them to the custodian of her employer plan for rollover. The custodian returned the checks because they were payable to her rather than to the plan for her benefit, and the issuing company required lengthy, unclear procedures to reissue them. Despite her diligence, the funds were not deposited within 60 days, and she did not cash the checks. The IRS attributed the delay to the financial institutions’ procedures and waived the deadline under IRC § 408(d)(3)(I). She received 60 days from the ruling’s issuance to contribute the distribution to the employer plan, subject to all other rollover requirements.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline after financial-institution procedures delayed reissuance of the checks?
• Outcome: Approved
• Key authorities: IRC § 408(d)(3); Rev. Proc. 2003-16

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201618017
INTERNAL REVENUE SERVICE

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 1 2016

SE:T:EP:RA:T3

U.I.L. 408.03-00
XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

Legend:

Taxpayer A = XXXXXXXXXXX
IRA X = XXXXXXXXXXXX
Financial Institution B = XXXXXXXXXXXX
Company C = XXXXXXXXXXXX
Plan Y = XXXXXXXXXXKX
Company E = XXXXXXXXXXXK
Amount D = XXXXXXXXXXXX

Dear XXXXXXXXX:

This letter is in response to your request submitted by your authorized
representative, dated March 18, 2015 and supplemented by correspondence
dated July 22, 2015, in which you request a waiver of the 60-day rollover
requirement contained in section 408(d)(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,

Taxpayer A asserts that her failure to accomplish a rollover of Amount D within
the 60-day period prescribed by section 408(d)(3) of the Code was due to the
complicated and time-consuming policies and procedures of Financial Institution
B and Company C.

Taxpayer A participates in Plan Y with Financial Institution B as the custodian.
Taxpayer A requested a distribution of Amount D from IRA X for the purpose of
rolling over Amount D into Plan Y. On October 28, 2014, Taxpayer A received
two checks totaling Amount D, which she forwarded to Financial Institution B for
a rollover into Plan Y. However, Financial Institution B returned the checks to her
on December 5, 2015. Taxpayer A was informed by Financial Institution B that
the checks, which were payable to her, should be reissued in the name of Plan Y
FBO Taxpayer A. However, Company C required lengthy and complicated
procedures in order to reissue the checks, which were not clearly outlined to
Taxpayer A. Despite Taxpayer A's diligence in attempting a timely rollover,
Amount D failed to be deposited into her account with Plan Y within the 60-day
rollover period. To date, Taxpayer has not cashed the checks.

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

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d), any amount paid or distributed out of an IRA shall be included in
gross income by the payee or distributee, as the case may be, in the manner
provided under section 72 of the Code.

Section 408(d)(3) of the Code defines and provides the rules applicable to IRA
rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code
does not apply to any amount paid or distributed out of an IRA to the individual
for whose benefit the IRA is maintained if-

(i) the entire amount received (including money and any other property) is
paid into an IRA for the benefit of such individual not later than the 60th
day after the day on which the individual received the payment or
distribution; or

(ii) the entire amount received (including money and any other property) is
paid into an eligible retirement plan (other than an IRA) for the benefit of
such individual not later than the 60th day after the date on which the
payment or distribution is received, except that the maximum amount
which may be paid into such plan may not exceed the portion of the
amount received which is includible in gross income (determined without
regard to section 408(d)(3)).


Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not apply
to any amount described in section 408(d)(3)(A)(i) received by an individual from
an IRA if at any time during the 1-year period ending on the day of such receipt
such individual received any other amount described in section 408(d)(3)(A)(i)
from an IRA which was not included in gross income because of the application
of section 408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for
partial rollovers.

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section
408(d) do not apply to any amount required to be distributed under section
408(a)(6).

Section 408(d)(3)(I) of the Code provides that the Secretary may waive the 60-
day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) of the Code 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
408(d)(3)(I) 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 408(d)(3)(I),
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 and documentation submitted by Taxpayer A support her
assertion that the failure to complete her attempted rollover of Amount D within
the 60-day period prescribed by section 408(d)(3) of the Code was due to the
complicated and time-consuming policies and procedures of Financial Institution

B and Company C.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service hereby
waives the 60-day rollover requirement with respect to the distribution of Amount
D from IRA X. Taxpayer A is granted a period of 60 days from the issuance of
this letter to contribute Amount D into Plan Y. Provided all other requirements of
Code section 408(d)(3), except the 60-day requirement, are met with respect to
such contribution, the contribution of Amount D will be considered a rollover
contribution within the meaning of section 408(d)(3) of the Code.

This ruling does not authorize the rollover of amounts that are required to be

distributed by section 408(a)(6) 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.

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 with this office.

If you have any questions concerning this ruling, please contact xxxxxxxxxxxxx,
xxxxxxxxxxxxxx, SE:T:EP:RA:T:3, at xxxxxxxxxxxxxxx.

Sincerely yours,

Carolyn E. Zimmerman, Acting Manager
Employee Plans Technical Group 3

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

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