Prohibited Transaction, Actual Distribution

[Gary]

A one person corporation with a DBPP with one participant withdraws money on a regular basis from DB plan.

No actual plan loans taken and no apparent intent to reimburse the plan.

It appears that this would be:

1. actual taxable distributions (not deemed distributions)

2. prohibited transactions subject to excise taxes.

Any comments on the above?

Also, if the amounts aren't refunded to the plan then the excise tax would be on-going year after year?

And lastly say a person makes a PT in the amoun of $10,000 on say 7/1/05.

Say the loan is repaid on 12/31/2006.

What is the excise tax for 2005? 2006?

Thanks.

[could be me maybe not]

Is the person married?

[Belgarath]

Has the individual already reached normal retirement date? Are the withdrawals from rollover money, and permitted by the plan document language, under Revenue Ruling 2004-12?

[Gary]

The person has not reached normal retirment and is still an employee.

Yes he's married, but I want to consider the aspects outside of the spousal consent.

That is, the points I raised in my post.

Thanks.

[JAY21]

Isn't this more than just a prohibited transaction ? More like a violation of the anti-assignment anti-alienation clauses under IRC 401(a) which could result in a disqualification of the plan ? Seems to me he'd need to go through a Voluntary Correction Program with the IRS and even then hope they don't disqualify the plan.

[David MacLennan]

Were the distributions to his personal accounts or to the corporate accounts?

Legal counsel should take the lead on this. I wouldn't give him advice if you are the just administering the plan.

[could be me maybe not]

Agreed. Many problems.