Missed 60-Day Rollover

Submitted by Sidney Poretsky on Thu, 2016-10-13 18:17

What is the procedure when a client misses a 60-day rollover due to advisor error? Client took money out of his mutual fund IRA. The advisor told him he had 90-days to put the money back without a sales charge, but can’t remember if he also told him he had a 60-day rollover deadline. Some of the money is being reinvested now just under the deadline. In case he misses the cut-off for the other money for what will be assumed to be advisor error,
who gets notified and when in an attempt to avoid a distribution and possible excess contribution tax, and penalties? I would greatly appreciate your answer.



Submitted by Alan - IRA critic on Thu, 2016-10-13 19:08

  • Under recent Rev Procedure 2016-47, there are 11 situations under which the custodian can accept a 60 day rollover late under a self certification process. However, advise error is not one of these 11 situations, and even if it were, this is not an advisor error. The advisor was only referring to investment related sales charge waivers, not the IRS rollover rules. If advisor told client he had more than 60 days to roll back the money, that would have been an advisor error but still would not qualify for the self certification process. While the client could still pursue an exception by filing a PLR, the cost of a PLR has risen considerably and unless the client withdrew a large sum of money, the cost and risks of not getting a positive outcome of the PLR is not worth taking.
  •  If the money is being reinvested now, the IRA custodian apparently accepted a rollover after 60 days. This is a custodian error if it is the same IRA account that issued the distribution. However, the error is in the client’s favor and would not pass IRA muster. Technically, any money reaching the custodian after 60 days from the date of receipt of the distribution is an excess IRA contribution which must be removed. And the original distribution would have to be reported as taxable and subject to penalty.
  • Not sure the above response reflects all the details and dates, but it sounds like none of the distribution was returned within the 60 day deadline. 

Submitted by Sidney Poretsky on Thu, 2016-10-13 19:43

Here’s a few more details, but it appears it’s not going to change anything, $7,500 came out of one fund on August 10th and $7,500 from another fund with the same company under the same plan, on the same day. Both checks were received on August 17th. $5,000 is on its way today to the fund comoany and will be reinvested tomorrow, which will be within the 60-day window. For the other money, client is over 59-1/2, so there should be no penelty, if not reinvested in time, just a tax on the distribution.  Thanks for your reply

Submitted by Alan - IRA critic on Thu, 2016-10-13 20:34

  • Regarding the distributions, were these different funds under the same IRA account number, or was there two different IRA accounts, which would mean that there were two distributions. Receiving the checks on the same date only makes for a single distribution if the checks came from the same IRA account. If there are two 1099R forms, the IRS will consider this two distributions. In that case, obviously only one of them is eligible for rollover. Not sure if your reference to “same plan” means there was only one IRA account.
  • With respects to the rollover contributions, the last day is Oct 17th that the custodian should accept a rollover contribution of this distribution. Once the custodian has possession the clock stops whether the money is actually invested yet or not.
  • So if there were two distributions instead of one, only 7500 can be rolled over. But to get the loads waived, it sounds like the entire 15k cannot be sent out today for just one fund. If there was just one distribution, perhaps there is still time to get all the money into the fund company by the 17th – overnight delivery?

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