The Internal Revenue Service (IRS) requires that you have 60 days from the date you receive a distribution from an IRA or retirement plan to transfer it to another plan or IRA. This is known as the 60 day rollover rule. However, there are a few exceptions to this rule. Trustee to Trustee transfers between IRA accounts are not subject to the once-a-year limit.
In addition, cumulative conversions from traditional IRAs to Roth IRAs are not counted toward the limit either. To be eligible for this new procedure, you must make your cumulative contribution to the employer's plan or to the IRA as soon as possible, once the previous applicable reasons no longer prevent you from doing so. This means that if you have a SEP IRA, a SIMPLE IRA, a traditional IRA and a Roth IRA, they are all treated the same for reinvestment purposes under the 60-day rule. The 60-day reinvestment rule applies primarily to indirect reinvestments, which the IRS actually refers to as 60-day accruals.
For any 12-month period, you're only allowed to reinvest one indirect IRA (even if you have multiple IRAs). Technically, it's possible to withdraw money from an IRA through indirect reinvestment and use it as a short-term loan. Most of the pre-retirement payments you receive from a retirement plan or IRA can be “reinvested” by depositing the payment into another retirement plan or IRA within 60 days. The new self-certification procedure is good news for IRA account owners who have a valid excuse for missing the 60-day deadline for tax-free reinvestments.
If the conditions are met, the plan administrator or the IRA trustee or custodian can accept your contribution as a tax-free cumulative contribution. If you qualify to receive a taxable distribution from an employer-sponsored retirement plan (such as a 401 (k)), you can avoid current taxes by directly transferring the distribution to another employer retirement plan or to an IRA (with direct reinvestment, you'll never receive the funds). However, if you choose to receive the funds instead of making a direct reinvestment, the plan must retain 20 percent of the taxable portion of your distribution, even if you intend to make a 60-day reinvestment. Nor can you make a transfer during this 1-year period from the IRA to which the distribution was transferred.
The IRS may waive the 60-day reinvestment requirement in certain situations if you missed the deadline due to circumstances beyond your control. However, keep in mind that this limit does not apply to direct reinvestments or to trustee-to-trustee transfers (or to Roth IRA conversions). This change will not affect your ability to transfer funds from one IRA trustee directly to another, since this type of transfer is not a reinvestment.
