Improvements to the 60-Day Rollover Requirements in Retirement Plans

The Internal Revenue Service (IRS) released Revenue Procedure 2016-47 on August 24, 2016, allowing for a waiver of the 60-day rollover requirement in Sections 402(c)(3) and 408(d)(3) of the Internal Revenue Code (Code).  The new guidance allows for a self-certification procedure that a participant can use when rolling funds over from one qualified plan to another or rolling funds into an IRA.

Code Section 402(c)(3) allows any amount distributed from a qualified retirement plan to be excluded from income if it is transferred to an eligible retirement plan no later than 60 days following the day a distribution is received by a participant.  This rule applies to all 401(k), 403(b), and eligible 457 governmental plans.  Revenue Procedure 2003-16 established a letter-ruling procedure that allowed participants to apply for a waiver of the 60-day rollover requirement.

Revenue Procedure 2016-47 now allows plan participants to make written certification to a plan administrator that a rollover contribution satisfies specific conditions.  Those conditions are:

  1. No prior denial by the IRS. If the IRS has previously denied a waiver request to a rollover of all or part of the distribution, a taxpayer cannot self-certify.
  2. Reason for missing the 60-day deadline. The taxpayer must have missed the 60-day deadline due to one or more of the following reasons:
    • An error committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;
    • The distribution, having been made in the form of a check, was misplaced and never cashed;
    • The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan;
    • The taxpayer’s principle residence was severely damaged;
    • A member of the taxpayer’s family died;
    • The taxpayer or a member of the taxpayer’s family was seriously ill;
    • The taxpayer was incarcerated;
    • Restrictions were imposed by a foreign country;
    • A postal error occurred;
    • The distribution was made on account of a levy and the proceeds of the levy have been returned to the taxpayer;
    • The party making the contribution to which the rollover relates delayed providing the information that the receiving plan required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.
  3. Contribution as soon as practicable; 30-day safe harbor. The contribution must be made to the plan as soon as practicable after the reason listed above no longer prevent the taxpayer from making the contribution.[1]

Plan administrators may now rely on the participant’s self-certification unless the plan administrator has actual knowledge that is contrary to the self-certification.  This self-certification is not deemed a waiver by the IRS of the 60-day rollover requirement, but the participant may report the rollover as a valid contribution until later informed otherwise by the IRS.

[1] Rev. Proc. 2016-47