Life and Death Planning for Retirement Benefits

Chapter 2: Income Tax Issues

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on a weekend or holiday. See PLRs 2006-06055, 2009-30052, 2009-51044, 2009-52066, and 2010-39041. The deadline is 60 days, not two months. A distribution made on March 12 th must be rolled over by May 11 th ; May 12 th is too late. PLR 2005-23032.

Does the deadline apply to direct rollovers?

When an employee requests a direct rollover from a nonIRA plan to another plan or to an IRA (see ¶ 2.6.01 (C)), IRS rules require the distributing plan to make the distribution check payable to the transferee plan or IRA, but permit the distributing plan to send or give the check to the employee . Reg. § 1.401(a)(31)-1 , A-4. It sometimes occurs that the employee for whatever reason fails to deliver the check to the recipient plan or IRA within 60 days. The IRS has issued contrary rulings on whether the 60-day deadline applies to direct rollovers. The 60-day deadline does not apply? In PLR 2010-05057, “The distribution check was given to Taxpayer A, but made out to Company B, FBO Taxpayer A; thus the check was not payable to Taxpayer A and Taxpayer A lacked control over the check and could not have disposed of it.… In short, Taxpayer A never received a distribution subject to the 60-day rollover requirement …” (emphasis added) and the deadline was not applicable. In PLR 2010-35044, the distribution was in the form of a direct rollover and accordingly “it was not subject to the 60-day rollover requirement,” therefore no “hardship extension” ( ¶ 2.7.05 ) was needed to enable the executor to deposit the plan’s check that had been issued to the employee just before he died. The 60-day deadline does apply? The IRS ruled that a hardship extension (deadline waiver) was required to allow completion of a direct rollover if the check had not been deposited within 60 days in PLRs 2004-24009 and 2004-39049. Similarly, in PLR 2013-11041, the participant requested direct rollover of her funds from her employer’s Plan X into an IRA. Plan X issued two checks payable directly to the custodian of the participant’s IRA, but mailed the checks to the participant, unfortunately to the wrong address. The participant did not receive the checks in time to deposit them into the IRA within the 60-day deadline. The IRS granted her a waiver of the deadline due to the company’s error, thereby confirming that the deadline does apply to a direct rollover, despite the two PLRs in 2010 that said the opposite. Fortunately, this particular IRS flip-flop should no longer be a concern. An individual faced with a “late rollover” due to a direct rollover that didn’t get completed within 60 days can presumably now simply self-certify that she is entitled to a hardship waiver of the 60-day deadline due to either financial institution error or a misplaced check. See ¶ 2.7.06 , #1 or #2.

How does the deadline apply to lost checks?

What if the participant never receives the check the plan sends him? The IRS has issued inconsistent PLRs on this one also. In PLRs 2004-30031 and 2004-36017, the IRS ruled that, if the distribution check is never received, there has been no distribution (the 60-day rollover period, in PLR 2004-30031, being