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CCH® PENSION — 03/30/10

Sixty-day rollover requirement was not applicable to plan distribution check that was payable to second plan's sponsor

A taxpayer's receipt of a check from her former employer's plan that she intended to deposit in her new employer's plan and that was made payable to her new employer for the benefit of the taxpayer was a direct rollover distribution that was not subject to the 60-day rollover requirement of Code Sec. 402(c)(3)(A), according to IRS Letter Ruling 201005057.

After the taxpayer left her first employer and began working for a second employer, she decided to roll over her benefits from the first employer's plan into the second employer's plan. She was given a check made payable to the second company, for the benefit of (FBO) the taxpayer. She kept the check for a period of time that exceeded 60 days and then deposited it into the second employer's plan. A ruling was requested that the IRS waive the 60-day rollover requirement with respect to the distribution.

The IRS explained that the taxpayer received a plan distribution that was a direct rollover, as that term is defined in Code Sec. 401(a)(31). Although the distribution check was given to her, it was made payable to the second company, FBO the taxpayer. Since the check was not payable to the taxpayer, she lacked control over the check and could not have cashed it. The IRS noted that a Form 1099-R that she received concerning the distribution supported this conclusion by showing in Box 7 Distribution Code "G," indicating a "Direct Rollover" to a qualified plan, with no withholding for federal income tax. The IRS ruled that the taxpayer received a distribution that was a direct rollover and, thus, was not subject to the 60-day rollover requirement. The taxpayer could deposit the check into the second employer's plan.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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