(817) 470-2910 rbassi@bassifinancial.com

By Sarah Brenner, JD
Director of Retirement Education

The IRS has recently added a new reason for self-certification of late rollovers to its list. Revenue Procedure 2020-46 modifies the list of reasons to include an IRA or company plan distribution made to a state unclaimed property fund and later claimed by an IRA owner or plan participant. Rev. Proc. 2020-46 is effective as of October 16.

Self-Certification

The deadline for completing a rollover is 60 days from the date the distribution is received. What happens when this important deadline is missed?  It used to be that the only remedy was to apply for an expensive and time-consuming Private Letter Ruling (PLR) from the IRS. That changed back in 2016 when the IRS released guidance allowing late rollovers to be accepted by providing the receiving financial institution with a “self-certification.”  The IRS even provides a model letter you can use, and unlike the PLR process, it is quick and free. Self-certification applies to 60-day rollovers from both company plans and IRAs. Self-certification does have its limits.  It is not a waiver of the 60-day rule. It allows the late rollover, but the IRS can disallow the late rollover in an audit if they determine the rollover did not qualify under any of the reasons for missing the 60-day deadline spelled out in the ruling.

New Reason

There used to be eleven reasons why self-certification would be allowed. Now the new guidance from the IRS adds a twelfth for situations where a distribution is claimed from an unclaimed property fund after having been abandoned (because the IRA owner or plan participant was missing). While this scenario does not happen every day, it may become more common as states become increasingly aggressive with abandoned property rules in order to fill budget gaps. In many states, the timeline for when property is considered abandoned is growing shorter and protections that used to be in place for retirement accounts are loosening.  Now, with this new guidance, funds that are later claimed from state unclaimed property funds will be potentially able to be rolled over much more easily using the self-certification procedures.

https://www.irahelp.com/slottreport/irs-adds-new-reason-self-certification-late-rollovers