IRS Automatic 60 Day waivers :Rev. Proc. 2016-47

Rollover contributions can be made to qualified retirement plans ( Solo 401(k), 403(b)/(a) and 457(b)) and IRA’s in one of two ways: (1) as a direct rollover from the qualified plan or IRA to another qualified plan or IRA or (2) as an indirect rollover to another qualified plan or IRA. For a direct rollover assets are moved directly to the new solo 401k plan. This can be done either as a wire transfer or as a check made payable to the new plan for the benefit of the participant. In an indirect rollover the distribution is made directly to the participant who then must contribute the amount to a plan or IRA no later than 60 days following the day the distribution took place. If any taxes were withheld they would need to be contributed to avoid possible taxation and penalties. In the past, if participants wanted to make an indirect rollover after the 60-day period, they needed to get a waiver from the Internal Revenue Service (IRS). While participants can still apply for this type of waiver, under Revenue Procedure 2016-47 the IRS is now providing automatic waivers of the 60-day requirement for specified reasons.

With this new guidance, participants can make indirect rollover contributions to qualified plans and IRAs past the previous 60-day deadline and can report the contribution as a rollover, as long as they meet the following criteria:

• Provide a certification in writing (the “Waiver”) to the plan administrator/IRA trustee;
• Enumerate at least one of the 11 acceptable waiver reasons for delay outlined by the IRS:
  • An error was committed by the financial institution making the distribution or receiving the contribution
  • The distribution was in the form of a check and the check was misplaced and never cashed
  • The distribution was deposited into and remained in an account that the participant mistakenly thought was a retirement plan or IRA
  • The participant's principal residence was severely damaged
  • One of the participant's family members died
  • The participant or one of their family members was seriously ill
  • The participant was incarcerated
  • Restrictions were imposed by a foreign country
  • A postal error occurred
  • The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to the participant
  • The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the participant’s reasonable efforts to obtain the information;
• Certify the current rollover has not previously been denied a waiver; and
• Complete the rollover as soon as practical after the acceptable reason for the delay has been resolved.

With this certification, the solo 401k plan Trustee can accept the rollover into the qualified plan based on the participant’s representations, unless they have actual knowledge that the participant does not meet the requirements for the waiver. The certification is subject to verification if the solo 401k trustee is audited.

This new process is in effect for indirect rollover contributions made after August 24, 2016.

To learn more about the retirement account regulations, VISIT HERE.