The rollover requirements, found in Sections 402(c)(3) and 408(d)(3) of the Internal Revenue Code, require any amount distributed from a qualifying plan to be transferred to an eligible retirement plan no later than the 60 days after they are received to avoid being taxed as income.
However, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) gave the IRS the authority to waive this requirement, providing participants an opportunity to apply for a hardship exception fordistributions that have not been rolled over to another eligible plan within 60 days. The exception in 2003-7 will be effective January 27, when it will be published in Internal Revenue Bulletin 2003-4.
To be eligible, a participant must apply for a hardship exception using the procedure outlined in Revenue Procedure 2003-4, accompanied by the user fee set forth in Revenue Procedure 2003-8 . Additionally, t he distribution must have occurred after December 31, 2001.
In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including:
- Errors committed by a financial institution
- Inability to complete a rollover due to extenuating circumstances, such as death, disability, hospitalization, or incarceration
Eligibility for the waiver applies to distributions from:
- Individual retirement plans under Sections 408(a) and 408(b)
- Plans qualified under Section 401(a)
- Annuities under Sections 403(a) and 403(b)
- Section 457 governmental plans
Revenue Procedure 2003-7 can be found at ftp://ftp.irs.ustreas.gov/pub/irs-drop/rp-03-07.pdf .
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