rp-03-16.pdf

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Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.

(Also, Part I, §§ 402 and 408.)

Rev. Proc. 2003-16

SECTION 1. PURPOSE

This revenue procedure provides guidance on applying to the Internal Revenue
Service for a waiver of the 60-day rollover requirement contained in §§ 402(c)(3) and
408(d)(3) of the Internal Revenue Code. It also provides for an automatic waiver under
certain circumstances.

SECTION 2. BACKGROUND AND GENERAL INFORMATION

.01 Section 401(a)(31) of the Code requires that a qualified trust provide for the
direct transfer of eligible rollover distributions. A similar rule applies to § 403(a) annuity
plans, § 403(b) tax-sheltered annuities and § 457 eligible governmental plans. (See
§§ 403(a)(1), 403(b)(10) and 457(d)(1)(C).) If a distributee fails to elect to have an
eligible rollover distribution paid directly to an eligible retirement plan, section 3405(c)
provides that the payor of a designated distribution that is an eligible rollover distribution
must withhold from such distribution an amount equal to 20 percent of such distribution.

.02 Sections 402(c)(3) and 408(d)(3) of the Code require generally that any
amount distributed from a qualified trust or individual retirement plan must be
transferred to an eligible retirement plan no later than the 60th day following the day of
receipt in order to avoid inclusion in the distributee's gross income. A similar rule
applies to § 403(a) annuity plans, § 403(b) tax-sheltered annuities and § 457 eligible
governmental plans. (See §§ 403(a)(4)(B), 403(b)(8)(B) and 457(e)(16)(B).)

.03 Section 72(t) of the Code imposes an additional tax on a distribution from a
qualified retirement plan equal to 10-percent of the amount of the distribution included
in the distributee's gross income, subject to certain exceptions.

.04 Section 644 of the Economic Growth and Tax Relief Reconciliation Act of
2001 ("EGTRRA"), Pub. L. 107-16, amended § 402(c)(3) of the Code and added new
§ 408(d)(3)(I) to permit the Secretary to waive the 60-day rollover requirement "where
the failure to waive such requirement would be against equity or good conscience,
including casualty, disaster, or other events beyond the reasonable control of the
individual subject to such requirement." The Conference Report to EGTRRA provides
examples of situations that may justify waiver of the 60-day rollover requirement, such
as during a period in which a distribution in the form of a check was not cashed, or for

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errors committed by a financial institution, or in cases of inability to complete a rollover
due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign
country or postal error. (H.R. Rep. No. 84, 107th Cong., 1st Sess. 252 (2001).) The
amendments made by § 644 of EGTRRA apply to distributions after December 31,
2001.

.05 Under §§ 7508 and 7508A of the Code, the time for making a rollover may
be postponed in the event of service in a combat zone or in the case of a Presidentially
declared disaster or a terroristic or military action. See Regulations § 301.7508-1 and
Rev. Proc. 2002-71, 2002-46 I.R.B. 850.

.06 Rev. Proc. 2003-4, 2003-1 I.R.B. (January 6, 2003), provides the procedures
for issuing letter rulings, information letters, etc., on matters under the jurisdiction of the
Commissioner, Tax Exempt and Government Entities Division.

.07 Rev. Proc. 2003-8, 2003-1 I.R.B. (January 6, 2003), provides guidance for
complying with the user-fee program as it pertains to requests for letter rulings,
information letters, etc., on matters under the jurisdiction of the Commissioner, Tax
Exempt and Government Entities Division.

SECTION 3. REQUIREMENTS FOR HARDSHIP EXCEPTION TO 60-DAY RULE

.01 Application to the Service. Except as provided in Section 3.03 below, a
taxpayer must apply for a hardship exception to the 60-day rollover requirement using
the same procedure as that outlined in Rev. Proc. 2003-4 for letter rulings,
accompanied by the user fee set forth in Rev. Proc. 2003-8.

.02 Requirements for favorable ruling. The Service will issue a ruling waiving
the 60-day rollover requirement in cases where the failure to waive such requirement
would be against equity or good conscience, including casualty, disaster or other events
beyond the reasonable control of the taxpayer. In determining whether to grant a
waiver, the Service will consider all relevant facts and circumstances, including: (1)
errors committed by a financial institution, other than as described in Section 3.03
below; (2) inability to complete a rollover due to death, disability, hospitalization,
incarceration, restrictions imposed by a foreign country or postal error; (3) the use of the
amount distributed (for example, in the case of payment by check, whether the check
was cashed); and (4) the time elapsed since the distribution occurred.

.03 Automatic approval. No application to the Service is required if a financial
institution receives funds on behalf of a taxpayer prior to the expiration of the 60-day
rollover period, the taxpayer follows all procedures required by the financial institution
for depositing the funds into an eligible retirement plan within the 60-day period
(including giving instructions to deposit the funds into an eligible retirement plan) and,
solely due to an error on the part of the financial institution, the funds are not deposited
into an eligible retirement plan within the 60-day rollover period. Automatic approval is

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granted only: (1) if the funds are deposited into an eligible retirement plan within 1 year
from the beginning of the 60-day rollover period; and (2) if the financial institution had
deposited the funds as instructed, it would have been a valid rollover.

.04 General rules. To be eligible for a waiver of the 60-day rollover period,
either automatic or through application to the Service, the distribution must have
occurred after December 31, 2001, and the rules regarding the amount of money or
other property that can be rolled over into an eligible retirement plan within the 60-day
rollover period (including § 402(c)(6) relating to sales of distributed property) apply to
deposits made pursuant to a waiver of the 60-day rollover period (thus, if a taxpayer
received $6,000 in cash from the taxpayer's IRA, the most that could be deposited into
an eligible retirement plan pursuant to a waiver of the 60-day rollover period is $6,000).
Also, the rules for waiver of the 60-day rollover period in this revenue procedure apply
to distributions from an individual retirement plan described in § 408(a) or (b), a plan
qualified under § 401(a), a § 403(a) annuity plan, a § 403(b) tax-sheltered annuity and a
§ 457 eligible governmental plan.

SECTION 4. EFFECTIVE DATE

This revenue procedure is effective on January 27, 2003.

DRAFTING INFORMATION

The principal author of this revenue procedure is Roger Kuehnle of the
Employee Plans, Tax Exempt and Government Entities Division. For further
information regarding this revenue procedure, please contact Employee Plans’ taxpayer
assistance telephone service at 1-877-829-5500 (a toll-free number), between the
hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday through Friday.