Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

measured from the date of the replacement check that the plan issued to replace the lost check). But then in PLR 2004-47042 the IRS ruled that the 60-day rollover deadline was measured from the date of the original (lost) check, not the date of the replacement check. § 408(d)(3)(A)(i) ) says the deadline is “the 60 th day after the day on which he [i.e., the participant or surviving spouse] receives the payment or distribution.” Emphasis added. Reg. § 1.408-4(b)(1) says the same. So, based on the Code and its own regulation, the IRS was right in PLRs 2004-30031 and 2004-36017 and wrong in 2004-47042. The IRS has done an end-run compromise on this issue by allowing an individual who missed the deadline due to the check’s being misplaced to do a late rollover, and “self-certify” to the recipient plan that the cause of lateness was a misplaced check. See ¶ 2.7.06 , #2. There are several exceptions to the 60-day deadline. The most significant one is that an individual may obtain a “hardship waiver” of the deadline; see ¶ 2.7.05 – ¶ 2.7.07 . Here are other less commonly seen exceptions: A. First-time homebuyer. There is a 120-day deadline rather than a 60-day deadline for the rollover of a “first-time homebuyer” distribution ( ¶ 9.4.09 ) if the distribution is not used to purchase the residence “solely by reason of a delay or cancellation of the purchase or construction of the residence.” The recontribution of the thwarted homebuyer distribution is also not treated as a rollover for purposes of the once-per-12-months rule ( ¶ 2.6.05 ). § 72 (t)(8)(E); PLR 2004-23033. B. Disaster-based extensions. The IRS tends to grant blanket extensions for this and other tax deadlines in the case of certain federally-recognized disasters. See the IRS pronouncement applicable to the disaster in question ( e.g. , IRS News Release IR-2004-115 extending deadlines for taxpayers affected by Hurricane Frances). C. Qualified reservist distribution. A qualified reservist distribution (QRD; ¶ 9.4.12 ) may be “rolled into” (i.e., contributed to) an IRA or Roth IRA at any time during the two-year period that begins on the day after the end of the active duty period. § 72 (t)(2)(G). The rollover contribution of a QRD does not erase the taxable income that resulted from the original distribution. The only advantage of this type of rollover is that (if the reservist has enough cash to replace the money he withdrew during his active duty service) this provision enables him to replace the funds in his plan without regard to the normal limits on IRA contributions ( ¶ 5.3.03 ). Since there is no tax deduction allowed for the contribution, it is advisable to make the contribution to a Roth IRA, so future earnings on the contribution will be tax-free. The “rollover” is reported on Form 8606 as a nondeductible contribution to an IRA. See Instructions for IRS Form 8606 (2016), p. 1. Non-hardship exceptions to the 60-day deadline

D. Frozen deposits. What if the participant receives a distribution and deposits the money in a bank, and then the bank becomes insolvent so the participant can’t get his money out in