Financial Planning Focus – New IRA Rollover Provisions

November 29, 2016
By Glen J. Buco CFP®

In August, the IRS issued guidance that taxpayers may use to claim eligibility for a waiver of the 60 day rollover requirement rule for a distribution from a retirement plan or IRA.

Generally, if a distribution from a plan or IRA is not rolled back into a qualified account within a 60-day period from the date of distribution, the distribution is taxable. In this new rollover requirement waiver, the IRS has provided 3 conditions which the taxpayer must satisfy and lists 11 reasons which will allow the taxpayer to rollover the distribution past the 60 day period without taxation or penalties. The taxpayer can self-certify in a written certification to the trustee or custodian that the waiver requirements have been met. The three conditions are that:

1. There be no prior denial by IRS of the rollover;
2. The reason for missing the deadline be listed in the rule; and
3. The rollover be deposited as soon as practical after discovery.

The reasons listed include an error on the part of the financial institution receiving or distributing the check, a lost check, a death in the taxpayer’s family or a serious illness, among others.

The delayed rollover is to be reported on Form 5498. As a general rule, we do not recommend using distributions from an IRA or plan as a short-term loan. However, situations do occur where a rollover was intended, but did not take place as expected. This change helps eliminate the taxes and penalties that can arise from mistakes and some unexpected life events.

Important Disclosures

  • Registration does not imply a certain level of skill or training.

  • Past performance or behavior of any index or other financial or governmental indicator is not necessarily indicative of future returns. This information is provided for general information only, and is not intended as personalized investment advice. This presentation is not intended to be any form of financial planning, investment, tax or legal advice. There is no substitute for individualized investment advice, and no conclusions should be drawn from this information. All readers should contact their professional investment, legal and tax advisors before entering into any investment or investment agreement.

  • Any conclusions presented or hypothetical presented are based upon facts derived from publicly available information, and are also based on certain assumptions, including that there are no additional changes to current law, and that demographic information regarding retirement accounts also remains unchanged. Further, hypothetical scenarios presented are solely presented for the purposes of demonstrating available retirement options, and do not include any information, analysis, or conclusions regarding other areas of an individual’s financial future.

  • Some information in this presentation is gleaned from third party sources, and while believed to be reliable, is not independently verified.