On May 27, 2011, the IRS, in four separate private letter rulings, “blessed” four fact patterns where it elected to waive the 60 day rollover requirement. Keep in mind, private letter rulings are directed only to the taxpayer who requested the ruling, and may not be used or cited as precedent (although as a practical matter practitioners use private letter rulings regularly as important guidance).
Under IRC Section 408(d), an individual may rollover (and thereby avoid tax) a distribution from an IRA into an eligible retirement plan for the distributee’s benefit within 60 days after the distribution. The term “eligible retirement plan” includes qualified pension, profit-sharing, stock bonus, and annuity plans, tax-deferred annuities under IRC Section 403(b), and eligible deferred compensation plans maintained by state and local governments and their agencies and instrumentalities. IRC Section 408(d) further gives the IRS the right to waive the 60 day requirement where events occur which are “beyond the reasonable control of the individual”. In Revenue Procedure 2003-16, the IRS stated it will consider all relevant facts and circumstances in deciding when to waive the 60-day rollover requirement, 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.
Four Separate Private Letter Rulings Allow a Waiver to the 60 Day Requirement
In each scenario described below, although well past the original 60 day rollover deadline, the IRS granted the taxpayer 60 days from the issuance of the ruling to properly contribute the amounts into an eligible retirement plan:
PLR 201121033- Financial advisor disregarded taxpayer instructions and improperly deposited amounts into a non-IRA account.
PLR 201121034- Financial advisor inadvertently set up an IRA for the benefit of the wrong person.
PLR 201121035- Involves a complicated fact pattern where a taxpayer failed to give proper rollover instructions within the 60 day period due to his deteriorating mental condition (he subsequently committed suicide) because of stress brought on by the weakening economy.
PLR 201121036- Financial advisor disregarded taxpayer instructions and improperly deposited amounts into a non-IRA account.