IRA rollover deadline waived after employer and trustee setup errors

Plain-English summary

A newly hired employee tried to transfer an existing IRA into an IRA offered through the employer. The employer’s affiliate arranged the transfer, and the funds were placed in an account titled as an IRA for the taxpayer’s benefit. The employer later learned that the trustee had never approved the account as an IRA, so the attempted rollover was not completed within 60 days. The taxpayer had not used the assets for another purpose, and a successor trustee agreed to hold the IRA if relief was granted. The IRS found that errors by the employer, its affiliate, and the original trustee caused the failure, waived the deadline, and gave the taxpayer 60 days to complete the rollover.

Ruling snapshot

• Question: May the taxpayer receive a waiver of the 60-day IRA rollover deadline when employer and trustee errors caused the funds to enter a non-IRA account?
• Outcome: Approved.
• Key authorities: IRC §§ 72, 408(a), 408(d)(3); Rev. Proc. 2003-16.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201621020

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

FEB 2 4 2016

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Uniform Issue List: 408.03-00

SE:T:EP:RA:T1

Legend
Taxpayer A =

IRA B =
Company C =
Company D =
Company E =

Trust Company F =

Trust Company G =
Amount 1 =

Amount 2 =

Amount 3 =
Dear :

This is in response to your request dated September 9, 2015, as supplemented by
correspondence dated January 11, 2016, in which you request, through your

2 201621020

authorized representative, a waiver of the 60-day rollover requirement contained in
section 408(d)(3) of the Internal Revenue Code (the “Code”).

The following facts and representations have been submitted under penalty of
perjury in support of the ruling requested.

Taxpayer A represents that he received a distribution equal to Amount 1, Amount
2, and Amount 3 from IRA B, which was maintained by Company C. Taxpayer A
asserts that his failure to accomplish a rollover within the 60-day period prescribed
by 408(d)(3)(A) of the Code was due to mistakes made by his employer, Company
D, acting through its wholly-owned affiliate, Company E, and Trust Company F.

In February of 2013, Taxpayer A was hired by Company D. As part of Company
D’s internal compliance procedures, Taxpayer A was asked to transfer his existing
accounts, including his IRA, to Company D. To facilitate the IRA transfer,
Taxpayer A began working with Company E, which assisted newly-hired
employees in rolling over their existing IRA accounts to new IRAs with Company
D. At the time, Company D relied on Trust Company F to serve as the trustee for
employees’ IRAs.

On June 11, 2013, Company E requested a transfer of IRA B on Taxpayer A’s
behalf, and on June 17, 2013, the assets of IRA B equal to Amount 1, Amount 2
and Amount 3 were transferred to an account with Company D entitled “Trust
Company F FBO Taxpayer A IRA.” However, this account was not an IRA
account. In May of 2014, Company D was notified by Trust Company F that
Taxpayer A’s IRA account had not been approved in its records. On January 1,
2015, Trust Company G became successor trustee for IRAs that were originally
trusteed by Trust Company F. Trust Company G has indicated that if a waiver is
granted, it will serve as trustee for Taxpayer A’s IRA.

Taxpayer A represents that he has not used Amount 1, Amount 2, or Amount 3 for
any other purpose. Company E submitted an affidavit by the consultant who
assisted Taxpayer A in attempting to roll over IRA B into another IRA.

Based on the above facts and representations, you request a ruling that the
Service waive the 60-day rollover requirement under section 408(d)(3) of the Code
as to the distribution consisting of Amount 1, Amount 2 and Amount 3 and that
Taxpayer A be given a period of 60 days from the issuance of the ruling to
complete the rollover of Amounts 1, 2 and 3.

Section 408(a) of the Code defines an IRA to mean a trust created or organized in
the United States, and requires that the trustee be a bank or an approved non-
bank trustee.

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d), any amount paid or distributed out of an IRA shall be included in

3 201621020

gross income by the payee or distributee, as the case may be, in the manner
provided under section 72.

Section 408(d)(3) of the Code defines, and provides the rules applicable to IRA
rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) does not apply to
any amount paid or distributed out of an IRA to the individual for whose benefit the
IRA is maintained if:

(i) the entire amount received (including money or any other property) is
paid into an IRA for the benefit of such individual not later than the 60th day after
the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is
paid into an eligible retirement plan (other than an IRA) for the benefit of such
individual not later than the 60th day after the date on which the payment or
distribution is received, except that the maximum amount which may be paid into
such plan may not exceed the portion of the amount received which is includible in
gross income (determined without regard to section 408(d)(3)).

Section 408(d)(3)(B) of the Code provides that section 408(d)(3) does not apply to
any amount described in section 408(d)(3)(A)(i) received by an individual from an
IRA if at any time during the 1-year period ending on the day of such receipt such
individual received any other amount described in section 408(d)(3)(A)(i) from an
IRA which was not includible in gross income because of the application of section
408(d)(3).

Section 408(d)(3)(D) of the Code provides a similar 60-day rollover period for
partial rollovers.

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section
408(d) do not apply to any amount required to be distributed under section
408(a)(6).

Section 408(d)(3)(I) of the Code provides that the Secretary of the Treasury may
waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) where
the failure to waive such requirement would be against equity or good conscience,
including casualty, disaster, or other events beyond the reasonable control of the
individual subject to such requirement.

Rev. Proc. 2003-16, 2003-4 I.R.B. 359, provides that the Service will issue a ruling
waiving the 60-day rollover requirement in cases where the failure to waive such
requirement would be against equity or good conscience, including casualty,
disaster or other events beyond the reasonable control of the taxpayer. In
determining whether to grant a waiver of the 60-day rollover requirement pursuant

4 201621020

to section 408(d)(3)(I) of the Code, the Service will-consider all relevant facts and
circumstances, 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.

The information and documentation submitted are consistent with Taxpayer A’s
assertion that the failure to accomplish a rollover within the 60-day period
prescribed by 408(d)(3)(A) of the Code was due to mistakes made by Company D,
Company E, and Trust Company F.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the 60-
day rollover requirement with respect to the distribution equal to Amount 1,
Amount 2 and Amount 3, and Taxpayer A has 60 days from the issuance of this
letter ruling to complete the rollover of an amount not exceeding Amount 1,
Amount 2, and Amount 3 to an IRA. Such rollover can consist only of the cash (or
other property) received in the distribution of Amount 1, Amount 2 and Amount 3
from IRA B.

Provided all other requirements of section 408(d)(3) of the Code, except the 60-
day requirement, will be met with respect to the contribution of Amount 1, Amount
2 and Amount 3, such contribution will be considered a rollover contribution within
the meaning of section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 408(a)(6) of the Code.

No opinion is expressed as to the tax treatment of the transaction described herein
under the provisions of any other section of either the Code or regulations which
may be applicable thereto.

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is
being sent to your authorized representative.

5 201621020

If you wish to inquire about this ruling, please contact
at . Please address all correspondence to SE:T:EP:RA:T1.

Sincerely yours,

Carlton A. Watkins, Manager
Employee Plans Technical Group 1

Enclosures:
Notice of Intention to Disclose
Deleted copy of this letter

cc: