September 7, 2010

Fix IRA Rollover problems

Back in 2001, Congress passed a new law to help out people who somehow messed up their rollovers between retirement plans.  What is really amazing to me is the number of errors committed by the various financial institutions.  These are entities that are supposed to know about the rules of IRAs and yet they are constantly messing things up.

Here are some of the more recent requests and whether they were successful or not.

(Here’s a bit of tax trivia, you see the long numbers?  There’s actually astounding logic behind the numbers.  The first 4 digits are the year of the ruling, the next 2 numbers are the week in the year the ruling was released, with the last 3 numbers being the sequential number of the ruling for that week.  Thus 201035036 would mean it was the 36th ruling released in the 35th week of 2010.  )

LTR 201035036 — Retirement plan owner wasn’t aware her retirement plan made a distribution of assets as part of a divorce proceeding.  IRS granted a waiver on the rollover.

LTR 201035037 — The IRA owner went to a financial institution and filled out the paperwork to open 2 different IRA accounts.  The financial institution got it right with 1 account, but messed up with the second account.  The financial institution admitted its mistake.  The IRS granted a waiver on the rollover.

LTR 201035043 — The IRS seems a bit harsh in this ruling.  The retirement plan owner filled out paperwork for retirement, with the paperwork showing she wanted her retirement plan money to go directly to her bank account.  She got sick and eventually died within the 60 day rollover period.  The service said that since she did not request a rollover via her retirement paperwork, there was no showing that she intended to complete a rollover.  The rollover waiver was denied.

LTR 201035044 — Unbeknownst to the IRA owner there was no problem here to begin with.  The owner requested a rollover from their pension plan, and the pension plan issued a check made payable to the IRA, not the IRA owner.  Under the tax code this is something called a direct rollover.  The IRA owner never deposited the check and died as well.  Even though this was never a rollover and thus no 60 day limit, someone requested a waiver from the rollover rules.  Needless to say, the IRS said this was not a taxable transaction.

LTR 201035045 — The IRA owner retired and opened an account with a bank or brokerage firm, lets just call it a bank.  The bank assigned a financial advisor to the IRA owner and the advisor sold the IRA owner an annuity.  As the value of the annuity dropped, the IRA owner requested a liquidation of the account and deposited the money in 2 separate CD accounts.  The IRA owner said the financial advisor never told the IRA owner about the rollover rules and that is why he didn’t meet the 60 limitation period.  Surprisingly enough, the IRA granted his waiver.

201036026 — IRA owner was depressed and confused about her finances as her husband had recently died and her son was deployed in IRA.  IRS allowed the IRA to be fixed.

201036029 — IRA owner was taking prescription medicine that caused confusion when he made a rollover.  IRS allowed him to fix his IRA rollover.

201037038 — The IRA owner moved funds from her IRA to a non-IRA account.  The IRA owner said she thought the account she moved the funds into was an IRA account but couldn’t provide any proof that was her intention.  IRS did not allow the IRA owner to fix her IRA.

201038017 — The IRA owner had a financial planner make a direct rollover of his IRA to a new company.  The new company accidentally transfered the IRA to a non-IRA account.  The new company readily admitted guilt.  The IRS allowed the IRA owner to fix the IRA.

201038018 — The IRA owner withdrew her IRA, intending to roll it over.  During the 60 rollover period, the IRA owner’s mother became sick and the IRA owner had to take care of the mother.  25 days after the 60 day rollover period, the IRA owner completed her rollover.  The IRS allowed the IRA owner to fix the IRA.

201039041 — IRA owner was laid off 4 days before the end of the 60 day rollover period.  They tried to complete the rollover, but the custodian’s offices were closed.  IRS allowed the IRA owner to fix the failed rollver.

201040039 — IRA owner rolled funds over to a financial institution that put the assets into a non-IRA account.  IRS allowed the IRA owner to fix the failed rollover.

201040041 — IRA owner rolled their funds into a real estate investment partnership that assured the IRA owner and their financial advisor the partnership could serve as custodian of the funds.  They couldn’t.  The IRS allowed the IRA owner to fix the failed rollover.

201041049 — IRA owner relied upon a financial advisor to roll the IRA into a new IRA account, the IRA owner also became ill and required surgery during the 60 day period.  No surprises here, the financial advisor failed to put the money into an IRA account.  The IRS allowed the IRA owner to fix the failed rollover.

201042041 — IRA owner took a rollover and his financial institution gave the wrong date for the deadline of his rollover.  The IRS allowed the IRA owner to correct the failed rollover.

201042042 — The IRA owner took a rollover and deposited it into her bank account.  She then used her IRA money, and some money form her husband (non-IRA money) to purchase a variable annuity.  While she told the insurance agent she wanted the IRA to go into an IRA annuity, the agent never told the insurance company to split up the money and invest her portion into an IRA annuity.  The IRS allowed her to correct her failed rollover.

201042043 — IRA made a direct rollover from their company’s retirement plan to a bank to open a CD.  Before the money was transferred the IRA owner and their financial advisor told the bank the CD was to be an IRA.  One small problem, the bank didn’t offer IRAs.  The IRA owner found out the account wasn’t an IRA once the bank sent him a check for the interest earned on the CD.  The IRS allowed him to fix the failed rollover.

201043043 — IRA owner took a distribution from their IRA intending to roll it over.  However their spouse was diagnosed with cancer and only had 3 weeks to live and the IRA owner missed the 60 window.  IRS allowed the IRA owner to fix the failed rollover.

201043044 — Not sure if this one is down right funny or merely mysterious.   The IRA owner was evidently assessed some taxes by “Agency A”.  The IRA owner caused his IRA to be transferred to this mysterious agency.  Then the agency determined the IRA owner didn’t in fact owe the taxes and transferred the IRA back to the financial institution.  Unfortunately this mysterious agency didn’t transfer it back to an IRA account.  The IRS allowed the IRA owner to fix the failed rollover.

201043045 — The taxpayer, while caring for his terminally ill wife, moved his IRA funds into a non-IRA account.  The IRS allowed him to fix his failed rollover.

201043046 — The taxpayer told company A to transfer his IRA to another IRA at company B.  Company B dropped the ball and did not put the assets into an IRA.  The IRS allowed the IRA owner to fix the failed rollover.

201043047 — The taxpayer took a distribution from their retirement plan, intending to roll it over to an IRA at company A.  However, company A never put the money into an IRA.  When the taxpayer found out, the tried to roll it over a 2nd time within the 60 day window, the company still screwed things up.  Compounding the error, the taxpayer’s financial advisor filled out the wrong paperwork.  The IRS allowed the taxpayer to fix her failed rollover.

201043049 — The IRA owner suffered took a distribution while they were on a number of different medications and were ill.  As a direct result of their medical condition they missed the 60 day window.  The IRS allowed the IRA owner to fix the failed rollover.