IRS Issues Self-Certification Guidance for Recipients of Retirement Plan and IRA Distributions Who Inadvertently Miss the 60-Day Rollover Deadline | Practical Law

IRS Issues Self-Certification Guidance for Recipients of Retirement Plan and IRA Distributions Who Inadvertently Miss the 60-Day Rollover Deadline | Practical Law

In Revenue Procedure 2016-47, the Internal Revenue Service (IRS) provided a self-certification procedure that provides a mechanism for recipients of retirement plan and individual retirement account (IRA) distributions who inadvertently miss the 60-day deadline for rolling these amounts into another retirement plan or IRA to avoid early distribution taxes.

IRS Issues Self-Certification Guidance for Recipients of Retirement Plan and IRA Distributions Who Inadvertently Miss the 60-Day Rollover Deadline

by Practical Law Employee Benefits & Executive Compensation
Published on 26 Aug 2016 • USA (National/Federal)
In Revenue Procedure 2016-47, the Internal Revenue Service (IRS) provided a self-certification procedure that provides a mechanism for recipients of retirement plan and individual retirement account (IRA) distributions who inadvertently miss the 60-day deadline for rolling these amounts into another retirement plan or IRA to avoid early distribution taxes.
On August 24, 2016, the Internal Revenue Service (IRS) issued Announcement 2016-113 and Revenue Procedure 2016-47 (guidance), which provide a self-certification procedure that permits recipients of retirement plan distributions, including recipients of individual retirement account (IRA) distributions, who inadvertently miss the 60-day deadline for rolling these amounts into an eligible retirement plan or IRA (60-day deadline) to avoid early distribution taxes.
If certain conditions are met, the guidance permits recipients to make a self-certification that they qualify for a waiver of the 60-day deadline. The appendix of Revenue Procedure 2016-47 also includes a model letter that may be used for self-certification.
Under Internal Revenue Code (Code) Sections 402(c)(3) (26 U.S.C. § 402(c)(3)) and 408(d)(3) (26 U.S.C. § 408(d)(3)), a distribution from a qualified retirement plan or IRA will be excluded from income if it is rolled over into an eligible retirement plan within the 60-day deadline. In most cases, a recipient who missed this deadline may only obtain a waiver by requesting a private letter ruling (PLR) from the IRS.
For more information on rollovers, see Practice Note, Contributions to a Defined Contribution Plan: Overview: Rollover Contributions.

Self-Certification Process and Conditions

Revenue Procedure 2016-47 allows a recipient to make a written self-certification to a plan administrator or IRA trustee that a contribution satisfies the following conditions:
  • The IRS has not previously denied a waiver request with regard to a rollover of all or part of the distribution.
  • The recipient missed the 60-day deadline due to one or more of the following reasons:
    • an error was committed by the financial institution receiving the contribution or making the distribution;
    • the distribution was made in the form of a check which was misplaced and never cashed;
    • the distribution was deposited into and remained in an account that the recipient mistakenly thought was an eligible retirement plan;
    • the recipient's principal residence was severely damaged;
    • a member of the recipient's family died;
    • the recipient or a member of the recipient's family was seriously ill;
    • the recipient was incarcerated;
    • restrictions were imposed by a foreign country;
    • a postal error occurred;
    • the distribution was made on account of a levy and the proceeds of the levy have been returned to the recipient; or
    • the person making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the recipient's reasonable efforts to obtain the information.
  • The contribution is made to the plan or IRA as soon as practicable after the cited reason(s) above no longer prevent the rollover. This is deemed satisfied if the contribution is made within 30 days after the cited reason(s) no longer prevents the rollover.
A self-certification may be made by using the model letter on a word-for-word basis, or by using a letter that is substantially similar in all material respects.

Effect of Self-Certification

Revenue Procedure 2016-47 describes the effects of participant or beneficiary of a retirement plan or IRA who successfully completes the self-certification process on:

Effect on Plan Administrator or IRA Trustee

A plan administrator or IRA trustee may rely on a participant's or beneficiary's self-certification when determining whether the conditions for a waiver of the 60-day deadline have been satisfied. However, the self-certification may not be relied on:
  • For other purposes.
  • When the plan administrator or IRA trustee has actual knowledge that the conditions have not been satisfied.

Effect on Recipient

A recipient of a retirement plan or IRA distribution that has completed a self-certification may report the contribution as valid rollover unless otherwise notified by the IRS. However, the self-certification is not binding on the IRS and in the course of an examination, the IRS may determine that the requirements for a waiver were not met because:
  • The self-certification contained a material misstatement.
  • The reason(s) claimed for missing the 60-day deadline did not prevent the recipient from completing a rollover within 60 days of receipt.
  • The recipient failed to make the contribution as soon as practicable after the reason(s) no longer prevented the recipient from making the contribution.
As a result, the recipient may be subject to additional income and penalties.

Additional Modifications

The following automatic waivers from the 60-day deadline currently offered under Revenue Procedure 2003-16 are still available:
  • A waiver due to an error by a financial institution.
  • Waivers upon request via a PLR.
However, Revenue Procedure 2016-47 modifies Revenue Procedure 2003-16 by providing that the IRS may also grant a waiver during an examination of the recipient's income tax return.

Effective Date

Revenue Procedure 2016-47 is effective on August 24, 2016.

Practical Implications

Previously, recipients of distributions who failed to meet the 60-day rollover deadline could generally only obtain a waiver by requesting a PLR from the IRS. This process was costly and resulted in a delay. Revenue Procedure 2016-47 eliminates both the cost and delay of requesting a PLR by providing an efficient self-certification process that alleviates prior burdens on:
  • Recipients of retirement plan and IRA distributions.
  • Plan administrators.
  • IRA trustees.
The IRS also noted that it intends to modify the instructions to Form 5498, which is used by IRA trustees to report a rollover contribution received during a year, to require that an IRA trustee that accepts a contribution after the 60-day deadline report that the contribution was accepted after the 60-day deadline.