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Self-Certification Procedure for Waiver of 60-Day Rollover Requirement

02.07.2017

Preparing for your first employee benefit plan auditThe IRS has provided a self-certification procedure that allows taxpayers to claim eligibility for a waiver of the 60-day rollover requirement under Code Sections 402(c)(3) and 408(d)(3). A plan administrator or an IRA trustee can rely on such certification in accepting and reporting receipt of a rollover contribution. The new procedure, Rev. Proc. 2016-47, is effective as of August 24, 2016.

Background

Code Secs. 402(c)(3) and 408(d)(3) allow a taxpayer to roll over, tax free, a distribution from a qualified plan or IRA into an eligible retirement plan. Generally, the individual must make the rollover contribution by the 60th day after the day the individual receives the distribution.

The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster or other event beyond the individual's reasonable control. Rev. Proc. 2003-16 provides for automatic approval for a waiver of the 60-day rollover requirement in certain circumstances in which a rollover is not made timely due to an error on the part of a financial institution. Taxpayers who do not qualify for an automatic waiver can apply for a waiver by submitting a request for a private letter ruling under the procedures outlined in Rev. Proc. 2016-4. If a taxpayer requests a waiver and the IRS grants it, the taxpayer typically has 60 days from the issuance of the letter ruling to complete the rollover.

Without a waiver, amounts not rolled over within the 60-day period do not qualify for tax-free rollover treatment and the taxpayer must treat them as a taxable distribution from the plan or IRA.

New Self-Certification Procedure

In Rev. Proc. 2016-47, the IRS has introduced a procedure for taxpayers to make a written certification to a plan administrator or an IRA trustee receiving a contribution that the contribution is eligible for a waiver of the 60-day rollover requirement. Taxpayers can make this certification by using the model letter in the appendix to the revenue procedure on a word-for-word basis or by using a letter that is substantially similar in all material respects.

Rev. Proc. 2016-47 states that self-certification is not a waiver by the IRS of the 60-day rollover requirement, but provides that a taxpayer may report the contribution as a valid rollover. The IRS, in the course of an examination, can still consider whether a taxpayer's contribution meets the requirements for a waiver. For example, the IRS might determine that the requirements for a waiver were not met because of a material misstatement in the self-certification, or that the reason the taxpayer claimed for missing the 60-day deadline did not actually prevent him or her from timely completing the rollover.

For purposes of accepting and reporting a rollover contribution into a plan or IRA, a plan administrator or IRA trustee can rely on a taxpayer's self-certification in determining whether the taxpayer has satisfied the conditions for a waiver of the 60-day rollover requirement.

Conditions for Making a Self-Certification

In order to make a self-certification, Rev. Proc. 2016-47 requires the taxpayer to have missed the 60-day deadline because of his or her inability to complete a rollover due to one or more of the following reasons:

(1) An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates

(2) The distribution, having been made in the form of a check, was misplaced and never cashed

(3) The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan

(4) The taxpayer's principal residence was severely damaged

(5) A member of the taxpayer's family died

(6) The taxpayer or a member of the taxpayer's family was seriously ill

(7) The taxpayer was incarcerated

(8) Restrictions were imposed by a foreign country

(9) A postal error occurred

(10) The distribution was made on account of a levy under Code Sec. 6331 and the proceeds of the levy have been returned to the taxpayer

(11) The party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer's reasonable efforts to obtain the information

Rev. Proc. 2016-47 also requires that the contribution be made to the plan or IRA as soon as possible once the reason or reasons described above no longer prevent the taxpayer from making the contribution. This requirement is satisfied if the contribution is made within 30 days after the taxpayer is able to do so. In addition, the IRS must not have previously denied a taxpayer's waiver request with respect to a rollover of all or part of the distribution to which the contribution relates.

(c) 2011-2016 Parker Tax Publishing. Use of this document is subject to Website Terms and Conditions. Republication is prohibited.

McKenzie_SeanIf you have any questions about rollover requirements, please contact your tax advisor or Sean McKenzie, Principal, Tax Services, at 314.983.1246 or smckenzie@bswllc.com.

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