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RMD reporting by IRA custodians/trustees


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3 replies to this topic

#1 Bearlee

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Posted 10 October 2007 - 01:50 PM

If an IRA participant doesn't get his RMDs for certain years, it's clear that he/she is penalized 50% for the distribution he/she should have received.

However, is there any liability for the IRA custodian for RMD failures?

I have a case where the participant had his IRA account changed from a Keough to a SEP. An auto-distribution was set up for the Keough but not the SEP. Thus, the participant didn't receive his RMD for 2 years, thinking it was automatically set up. The RMD notices were sent in the proper fashion.

Is any of this on the custodian or is the custodian only obligated to report? I saw in the 1.408 Regs that custodians are treated as Plan administrators for qualified plans. If you take the analogy all the way, if this were a qualified plan, there would be a ERISA 404(a) violation for not adminstering the plan properly -- as well as a prohibited transaction?

I've read Notice 2002-27 and there is nothing about any penalties for custodians for not reporting the RMD and/or when an RMD has not been made.

Any guidance and authority would be appreciated. Thanks!

#2 Guest_named_mjb_*

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Posted 16 October 2007 - 10:04 AM

Have your read the Agreement with the custodian? If you do you will see that the Custodian disclaims any responsibility to advise the owner of the amount of MRDs or take any action to pay MRDs. Since the SEP is funded through an IRA the MRDs for an IRA can always be taken from another IRA. Thus the custodian will never know if the MRD needs to be distributed from that IRA .

Edited by mjb, 16 October 2007 - 10:07 AM.


#3 jevd

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Posted 16 October 2007 - 11:11 AM

The following information may be of use, however the actual distribution is the responsibility of the account owner.


Notice 2003-3, I.R.B. 2003-2, January 13, 2003.

Individual retirement accounts (IRAs): Trustees: Minimum distributions: Reporting requirements
The IRS has clarified that IRA trustees can satisfy minimum distribution reporting requirements with regard to IRA owners by using one or both of two alternatives set forth in IRS Notice 2002-27, which provided that statements furnished to IRA owners must contain either the required minimum distribution amount and the date by which it must be distributed or a statement providing that a minimum distribution is required for the calendar year, the date by which it must be distributed, and an offer to calculate the amount of the distribution. Also, for 2003, trustees may transmit required minimum distribution reporting statements electronically, but only if the electronic transmission procedures for Form W-2 (Wage and Tax Statement) are satisfied.

Edited by jevd, 16 October 2007 - 11:12 AM.

JEVD
Making the complex understandable.

#4 Bearlee

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Posted 17 October 2007 - 07:43 PM

Thank you to both those who responded to my post!


The following information may be of use, however the actual distribution is the responsibility of the account owner.


Notice 2003-3, I.R.B. 2003-2, January 13, 2003.

Individual retirement accounts (IRAs): Trustees: Minimum distributions: Reporting requirements
The IRS has clarified that IRA trustees can satisfy minimum distribution reporting requirements with regard to IRA owners by using one or both of two alternatives set forth in IRS Notice 2002-27, which provided that statements furnished to IRA owners must contain either the required minimum distribution amount and the date by which it must be distributed or a statement providing that a minimum distribution is required for the calendar year, the date by which it must be distributed, and an offer to calculate the amount of the distribution. Also, for 2003, trustees may transmit required minimum distribution reporting statements electronically, but only if the electronic transmission procedures for Form W-2 (Wage and Tax Statement) are satisfied.