Employee Benefits-IRS Issues New Revenue Procedure To Help People Make IRA and Retirement Plan Rollovers

The IRS has issued Revenue Procedure 2016-47 (the “Rev. Proc.”), which provides guidance concerning waivers of the 60-day rollover requirement contained in sections 402(c)(3) and 408(d)(3) of the Internal Revenue Code (the “Code”). Specifically, the Rev. Proc. provides for a self-certification procedure (subject to verification on audit) that may be used by a taxpayer claiming eligibility for a waiver under Code section 402(c)(3)(B) or 408(d)(3)(I) with respect to a rollover into a plan or individual retirement arrangement (an “IRA”). It provides that a plan administrator, or an IRA trustee, custodian, or issuer, may rely on the certification in accepting and reporting receipt of a rollover contribution. It also modifies Rev. Proc. 2003-16 by providing that the IRS may grant a waiver during an examination of the taxpayer’s income tax return. An appendix in the Rev. Proc. contains a model letter that may be used for self-certification.

The IRS discussed the Rev. Proc. in IR-2016-113, August 24, 2016. There, the IRS says the following:

The IRS today provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or IRA. In the Rev. Proc., posted today on IRS.gov, the IRS explained how eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the Rev. Proc. includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver. Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS. A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the Rev. Proc., apply to them. These circumstances include a distribution check that was misplaced and never cashed, the taxpayer’s home being severely damaged, the death of a family member, the serious illness of the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.

Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the Rev. Proc.

The IRS encourages eligible taxpayers wishing to transfer retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process. For more information about rollovers and transfers, check out the Can You Move Retirement Plan Assets? section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions page on IRS.go