Self-Certification May Be Option for Clients Who Miss Rollover Deadline
By Alexis Gonzalez-del-Valle, CIP, CHSP
Individuals have 60 calendar days, starting the day after they receive a distribution from an IRA or eligible retirement plan, to complete an indirect rollover. (The 60-day limit does not apply to direct rollovers to or from eligible retirement plans.) The individual may be able to roll over the distribution in more than one transaction, as long as all transactions associated with the single distribution are completed within 60 days. If more than 60 days pass, the rollover generally cannot be completed.
Those who fail to complete a rollover within the required 60-day timeframe may wonder if there’s any relief from the 60-day limitation. In certain circumstances, the IRS does provide some relief—an extension, more or less—in the form of self-certification. Plan participants and IRA owners who feel that they qualify under certain circumstances for an extension of the 60-day rollover period may provide a written self-certification under the rules described in Revenue Procedure (Rev. Proc.) 2016-47, which has since been modified and superseded by Rev. Proc. 2020-46.
Qualifying for Self-Certification
The IRS issued Rev. Proc. 2016-47 in August 2016, and it describes an option for plan participants and IRA owners to self-certify that they qualify for relief from the 60-day rollover rule. Financial organizations offering IRAs and plan administrators generally may rely on this certification. This self-certification is only available for the purpose of accepting rollovers that are past the 60-day deadline, not for rollovers that do not meet the other rollover requirements.
For an individual to qualify for self-certification,
the IRS must not have previously rejected a waiver related to the rollover;
the rollover contribution must satisfy all the requirements of a valid rollover (except for the 60-day rule); and
the individual must have missed the 60-day deadline because one or more of the following reasons prevented the individual from completing the rollover.
An error was committed by the plan administrator or financial organization receiving the contribution or making the distribution to which the contribution relates.
The distribution check was misplaced and never cashed.
The individual deposited and kept the distribution in an account that she mistakenly thought was an eligible plan or IRA.
The individual’s residence was severely damaged.
A member of the individual’s family died.
The individual or her family was seriously ill.
The individual was incarcerated.
Restrictions were imposed by a foreign country.
A postal error occurred.
The distribution was made because of an IRS levy and the levy proceeds were returned to the individual.
The distributing plan delayed providing the information required to complete the rollover despite the individual’s reasonable efforts to obtain the information.
The individual recovered amounts that were distributed and paid to a state unclaimed property fund.
The last reason was added in October 2020 by IRS Rev. Proc. 2020-46.
Using Self-Certification
When using the rollover self-certification, the rollover contribution must be made to the IRA or eligible retirement plan as soon as practicable after the qualified reason no longer prevents the individual from completing the rollover. This requirement is considered satisfied if the rollover contribution is made within 30 days after the reason no longer applies.
An individual may make this self-certification in writing by completing and signing the model self-certification letter in Rev. Proc. 2020-46 or a substantially similar letter or form. Forms providers may offer financial organizations a late contribution certification form that they can have clients fill out and sign. For example, the Ascensus IRA Certification for Late Rollover Contribution documents an individual’s reason for late rollover, verifies the individual’s understanding of the certification, and informs the individual that the late rollover will be reported to the IRS.
For the purposes of determining whether an individual satisfies the conditions for a waiver, the financial organization or plan administrator may rely on the individual’s self-certification, unless it has knowledge to the contrary. The financial organization or plan administrator should retain a copy of the certification in the individual’s file and provide it if requested during a tax examination.
Rev. Proc. 2020-46 indicates that if the IRS later determines, upon examination (e.g., through a plan or IRA owner audit), that the self-certification requirements were not satisfied, the individual may be subject to taxes and penalties. On the other hand, the IRS also has the authority during a tax examination to waive the 60-day restriction, even if the individual did not self-certify her eligibility for a waiver.
Reporting a Self-Certified Late Rollover
Financial organizations accepting a self-certified late rollover in 2017 and later are required to report the late rollover amount(s) received into an IRA on IRS Form 5498, IRA Contribution Information, in Box 13a, Postponed/late contrib., and to enter the code “SC” in Box 13c, Code. These amounts should not be entered in Box 2, Rollover contributions.
