19 January 2021
Charles Leggette
President of Austin Capital Retirement Plan Services
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Receiving Rollovers from another Qualified [?] Plan – a sticky issue simplified by IRS
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One of the most bothersome, time consuming and paperdriven areas of due diligence by a Plan Administrator receiving a rollover fromanother Plan has been ensuring that the money comes from a ‘Qualified Plan’.The IRS now will permit the receiving Plan to check the latest sending Plan’s5500[line 8a] to confirm that the sender has not entered 3C. Details below.

Whereamounts are rolled over from one qualified plan to another, the IRS ruled thatthe administrator of the receiving plan may reasonably rely on Form 5500 seriesfilings by the distributing plan in evaluating whether the distributing plan isa qualified plan for rollover purposes. The Form 5500 filings are available onthe EFAST2 database which can be accessed through the Labor Department’swebsite. The site can be searched for the most recently filed Form 5500 for thedistributing plan. On that filing, if line 8a does not include code 3C (for aplan not intended to be qualified under Code Secs. 401, 403 or 408), theadministrator for the receiving plan may assume the distributing plan isqualified. In the example provided, the trustee of the distributing plan issueda check to the trustee of the receiving plan for the benefit of the employeeindicating that the trustee of the distributing plan treated the distributionas an eligible rollover distribution to be directly rolled over. Theadministrator of the receiving plan could reasonably conclude that thedistribution was a valid rollover contribution, absent any evidence to thecontrary, the IRS stated.

In thecase of a rollover from a traditional IRA to a plan, the IRS ruled that theadministrator of the receiving plan could reasonably conclude that the sourceof funds was an employee’s noninherited, traditional IRA where, in the exampleprovided, the check stub identified the source of the funds as the employee’sIRA. The administrator could also reasonably conclude the amount was intendedas a rollover contribution because the check was made out to the trustee of theplan for the benefit of the employee. The employee certified that thedistribution included no after-tax amounts, and that she will not attain age 701/2 by the end of the year of the transfer. It was therefore reasonable for theadministrator to conclude the distribution could be rolled over.

In bothsituations, the IRS ruled, the results would be the same if there had been nocheck stub identifying the source of the funds, as long as the check itselfidentified the source of the funds. Similarly, the results would be the same ifthe rollover had been accomplished through a wire transfer or other electronicmeans, provided that the plan administrator or trustee for the distributingplan or IRA had communicated to the plan administrator for the receiving planthe same information regarding the source of the funds.

Source:IRS Rev. Rul. 2014-9

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