How the 60-Day Rollover Waiver Self-Certification Works; Nonspouse Beneficiary Portability Options
By Ben Maas, CISP, CIP, CHSP
An IRA owner wants to deposit a rollover contribution 72 days after having received the distribution. He said he was hospitalized just before the 60-day rollover deadline and was released yesterday. Can we treat this transaction as a rollover? If so, do we need to process the transaction any differently?
Yes. The IRS allows individuals to self-certify that they qualify for relief from the 60-day rollover rule by completing and signing a model self-certification letter found in Revenue Procedure 2016-47, or by using a letter that is substantially similar. The financial organization receiving the rollover may rely on the individual’s self-certification, unless it has knowledge that the certification is inaccurate. A copy of the certification document should be kept in the individual’s file and should be available if requested during a tax examination.
For an individual to qualify for self-certification, the IRS must not have previously denied a waiver related to the rollover. The rollover contribution must otherwise satisfy all of the requirements of a valid rollover. Additionally, the individual must have missed the 60-day deadline because one or more of the following reasons prevented him from completing the rollover.
Financial organization error
Misplaced check
Mistaken deposit into non-eligible account
Severe damage to principle residence
Death of family member
Serious illness (IRA owner or family member)
Incarceration
Restrictions imposed by a foreign country
Postal error
Return of IRS levy proceeds to the IRA owner
Delay by the distributing plan in providing information required to complete the rollover
The IRA owner must make the rollover contribution to the IRA as soon as practicable after the qualified reason no longer prevents him from making the rollover contribution. This requirement is deemed to be satisfied if the contribution is made within 30 days after the reason no longer applies.
If the IRS later determines upon examination (e.g., IRA owner audit) that the self-certification requirements were not met, the individual may be subject to additional taxes and penalties. The IRS also has the authority during a tax examination to waive the 60-day limitation, even if an individual has not self-certified his eligibility for a waiver.
The IRS requires financial organizations to report self-certified late rollover amounts received in 2017 and later on IRS Form 5498 in Box 13a, Postponed contribution, and to enter the code “SC” in Box 13c, Code. Form 5498 should be used to report the rollover contribution in the year actually made, not for the year in which the rollover should have occurred.
A nonspouse beneficiary wants to move inherited IRA assets from our organization to an inherited IRA at another financial organization. How should we process this transaction?
This transaction must be processed as a transfer. Nonspouse beneficiaries are not allowed to roll over inherited IRA assets once they receive a distribution. If they wish to preserve the assets in an inherited IRA and continue to take distributions, then the check must be made payable to the receiving organization (e.g., “Financial Organization, Trustee, for the benefit of Tom Anderson’s Traditional IRA”).
An IRA owner at our organization has inherited her father’s 401(k) plan. She wants to move the 401(k) money to our financial organization. What options are available to her?
As a nonspouse beneficiary, this IRA owner would need to establish an inherited IRA at your financial organization to receive the inherited 401(k) plan assets. In addition, the inherited plan assets must be directly rolled over to your financial organization. In a direct rollover, the plan participant or beneficiary has no access to the assets being rolled over.
To facilitate a direct rollover, the plan administrator should make the check payable to your financial organization for the benefit of the person’s inherited IRA. Nonspouse beneficiaries may not roll over the inherited retirement plan assets to other retirement plans. In addition, they may not roll over inherited plan assets to their own IRAs, either directly or indirectly.
