IRS Publishes Guidance Allowing Taxpayers to Self-Certify An Excuse from the 60-day Rollover Rule in Specified Hardship Scenarios
If you ask, plan administrators will tell you that for every deadline or specified time limit that is imposed by law upon plan participants for taking action with respect to an employee benefit plan, there are always a significant number of participants who come forward with one or more “excuses” why they could not meet the deadline. Often these “excuses” are legitimate. However, only occasionally is there a legally authorized protocol provided to plan administrators and participants which can remedy the circumstance of the missed deadline. Such an occasion occurred on August 24, 2016.
In Rev. Proc. 2016-47, the IRS published guidance to assist participants who, because of certain circumstances of hardship, miss the 60-day deadline for rolling over qualified retirement plan or IRA assets and, without a legally authorized excuse, would otherwise be required to pay additional taxes due on early distributions. Even better, the IRS set forth a protocol for participant “self-help,” which permits plan administrators to accept transfers of plan assets after the 60-day deadline has passed.
The reasons the IRS deems to provide legitimate excuse for missing the 60-day deadline are, in summary:
a) An error by the financial institution in receiving a contribution or distributing assets relating to a contribution;
b) The distribution made by check was lost and not cashed;
c) The distribution was inadvertently deposited to, and left in an account the participant believed was, an eligible retirement plan, but was not;
d) The participant’s residence suffered severe damage;
e) There was a death in the participant’s family, or a serious illness;
f) The participant was incarcerated;
g) A foreign country imposed a restriction which delayed deposit of the participant’s plan assets;
h) There was a delay caused by the postal service;
i) The plan assets intended to be distributed were levied by the IRS, and the IRS later returned the plan assets to the participant; or
j) The distribution of plan assets and the rollover were delayed due to the failure of the distributing party to provide the information needed by the recipient plan or IRA, despite the participant’s “reasonable efforts” to obtain the information.
See Rev. Proc. 2016-47.
A plan participant who has received a prior IRS determination that it will not waive the 60-day time limit as to a particular distribution event is not eligible for the “self-help” offered by Rev. Proc. 2016-47. Otherwise, however, the participant may write a “certification” to a plan administrator or IRA trustee that the participant’s excuse for missing the 60-day deadline for depositing distributed plan assets into another tax-qualified retirement plan or IRA fits within the conditions that permit such delay to be excused as set forth in Section 3.02 of Rev. Proc. 2016-47. The plan administrator or IRA trustee may rely upon such certification, unless the plan administrator or trustee possesses knowledge that the facts recounted in the certification are not accurate or are untrue.
The plan participant may also rely upon the certification in taking a tax position on the participant’s individual tax return. On examination, however, the IRS has authority to challenge the position taken by the participant based upon the written certification. The IRS also has the ability to determine other statutory or regulatory grounds exist that support a waiver of the 60-day rollover time limit.
A plan participant who desires to take advantage of the “self-help” procedure contained in Rev. Proc. 2016-47 can find the IRS’s preferred form for certification, the “Certification for Late Rollover Contribution,” attached as an appendix to the Rev. Proc. Participants who desire to rely upon the certification are advised to deposit their distributed plan assets into an eligible retirement plan or IRA “as soon as practicable” after the event which caused the deposit delay has resolved. As an express “safe harbor,” the participant who makes the deposit within thirty (30) days of resolution of the event that caused the delay described in the certification will be deemed to have made such deposit “as soon as practicable” within the meaning of Rev. Proc. 2016-47.