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February 17, 2009

60-day Rollover Rule

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Definition

Rule under which a participant is required to rollover distribution amounts received in order for the amount to be treated as nontaxable.  Distribution amounts that are rolled over within the 60-days are not subject to the 10% early distribution penalty.

Indirect Roth IRA conversions are also subject to the 60-day rollover rule

  • The 60-day period is defined as the ‘60th day following the day on which the participant receives the distribution’. Therefore, to determine which date is the 60th day, start counting the day that follows the day the participant receives the distribution. For instance, if the distribution is received today, the 1st day is tomorrow.
  • For first time homebuyer distributions, the period is extended to 120-days (IRC Sec. 72(t)(8)(E))
  • Only rollover-eligible amounts are eligible for the 60-day rollover rule
  • Direct rollovers are not subject to the 60-day limit
  • Indirect rollovers are subject to the 60-day rule

 

Referring Cite

IRC § 402(c)(3)), § 408(d)(3).   Treas. Reg. §1.402(c)-2, Q&A-11

Additional Helpful Information

  • The IRS 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. Click here for more on this topic
  • Under IRC §§7508 and 7508A, 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. [ Regulations §301.7508-1 and Rev. Proc. 2002-71, 2002-46 I.R.B. 850]

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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