60-day Rollover Waivers

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There are all sorts of problems that can crop up when attempting to complete a 60-day rollover of qualified funds to an IRA.   Sometimes you can be granted an automatic waiver of the 60-day rule, but only if all of the following apply:

• The financial institution receives the funds on your behalf before the end of the 60-day rollover period.
• You followed all the procedures set by the financial institution for depositing the funds into an eligible retirement plan within the 60-day period (including giving instructions to deposit the funds into an eligible retirement plan).
• The funds are not deposited into an eligible retirement plan within the 60-day rollover period solely because of an error on the part of the financial institution.
• The funds are deposited into an eligible retirement plan within 1 year from the beginning of the 60-day rollover period.
• It would have been a valid rollover if the financial institution had deposited the funds as instructed.

If the above conditions do not apply, you can still request a ruling from the IRS, called a Private Letter Ruling (PLR), if you still think your circumstances merit the inclusion of your rollover even though it was beyond the 60-day period.  There is a $3,000 fee for requesting the PLR.

When making a determination on your request, the IRS will consider all of the following details:

• Whether errors were made by the financial institution (other than those described under ”Automatic waiver”, earlier),
• Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error,
• Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check), and
• How much time has passed since the date of distribution.

If you are planning to request a PLR, keep in mind that the costs can be quite high.  In addition to the earlier-listed $3,000 user fee, the cost for a tax attorney to prepare the request can be anywhere from $3,000 to $10, 000 and more, depending upon the complexity.

Once again, the problems you find with the 60-day rollover highlight the benefit of doing the relatively painless trustee-to-trustee transfer.

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Jim Blankenship, CFP®, EA, is an expert in personal retirement, IRAs, and tax issues, with more than 20 years of experience in the industry.  . Read more from this author