2nd chance for those who missed the 60-day IRA/401(k) rollover window

New IRS waiver program effective immediately

If you, one of your clients, or one of your employees inadvertently exceeded the 60-day limit when moving retirement funds associated with a “rollover”, they can now receive an IRS waiver of penalties and keep these funds in a retirement plan. The full details may be found in IRS Revenue Procedure 2016-47.

Does this apply to Trustee-to-Trustee transfers?

The 60-day limit doesn’t apply when the funds are moved directly from one financial institution to another so this waiver isn’t required or needed. Rather, this is for those individuals who receive an eligible rollover distribution from their IRA or retirement plan and fail to get those funds reinvested into another qualified retirement plan option within 60 days.

How does it work?

The IRS allows the taxpayer to “self-certify” for a waiver if they meet one or more of 11 qualifying events or circumstances. These events include, but are not limited to:

• Taxpayer deposited the funds into an account they mistakenly believed was a retirement plan;
• A postal error occurred;
• Check was misplaced and never cashed; or
• Death of a Member of a taxpayer’s family.

Are there limits?

The key issues are that the rollover in question must be been a valid rollover – you can’t get a waiver if the rollover itself was invalid and that a taxpayer is only allowed one IRA-to-IRA rollover per 12-month period.

While we encourage everyone to use the Trustee-to-Trustee option, many do not, miss the window and incur a large tax bill. Now, they have a 2nd chance.

As always, if you have questions on this or need more, please contact your Odyssey consultant.