The MRD paid in 2007 (for accrual in 2006) for a participant was incorrect. It was calculated using the account balance method which I believe is now inappropriate for use after 2005.


Whats the remedial action for incorrect MRD distributions. What kind of taxes/penalties etc apply?

Thanks

Without figuring out why the MRD might have been incorrect, it can be corrected by the plan sponsor through a filing with the IRS under the EPCRS Voluntary Correction Program (VCP). The VCP filing also can request that the 50% excise tax be waived.

Regardless of what you do with the penalty, correcting it is the first step, IMHO.

Has anyone ever heard of the IRS actually assessing the 50% penalty? I have not.

ASPPA Journal, summer issue, interview with Joyce Kahn, excise tax under 4974 for 401(a)(9) violation - "In the case of employees other than 10% owners, if an employer requests it, we automatically waive it. In the case of a 10% owner, then we need some justification ..."

For what it's worth, I have applied for and received a waiver of the excise tax for a 100% owner of a company (with about 75 employees) under VCP. He missed MRDs for 9 straight years!

Sieve,
I realize this is an old thread, but if you're out there could you share your explanation for the cause of the MRD failure. I have been asked to prepare a VCP filing for a substantial owner who missed 6 years of payments.
Thanks

jjren - Sent description offline through PM.