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A Private Letter Ruling (PLR) from 2010 presents an interesting outcome from an indirect rollover – a rollover that was not done in a trustee-to-trustee transfer.
This particular PLR, 201005057, deals with a situation where the taxpayer received a check from her former employer plan, however the check was made out to her new employer, for her benefit.
When the taxpayer failed to deliver the check to the new plan within 60 days, the rollover became questionable – since indirect (non-trustee-to-trustee transfers) are generally limited to be completed within 60 days. (She did deposit it, just a little later than 60 days.)
When the taxpayer received a 1099R from the former employer plan, it was coded with distribution code “G”, which indicates a direct rollover. Therefore the intent for a direct rollover was clear.
The IRS ruled in favor of the taxpayer, since the check was made out to the new plan, and therefore not in the control of the taxpayer. In other words, the taxpayer could not have used the funds for any other purpose than to deposit into the new plan. The check made out to the new custodian effectively acted as a direct rollover into the new plan, in the eyes of the IRS, and as such it was not subject to the 60-day limit.
It appears from this PLR that a taxpayer receiving such a distribution can delay depositing the check after the 60-day limit, since such a distribution is considered to be a direct rollover. I don’t know of any practical reason you would want to do this, but if circumstances brought about such a situation, it’s good news.
Keep in mind that PLRs cannot be used to substantiate a position or cite as a precedent (pursuant to 26 USC § 6110(k)(3)), but can be used as guidance for determining if a matter is worthy of pursuing via your own private letter ruling.