Participant failed to take RMDs.

[KateSmithPA]

If a participant fails to take RMDs for more than one year and then makes up for it in a subsequent year - taking all required up to that date - how is the distribution taxed? Is it all taxed in the year of distribution, or does the participant have to amend previous tax returns to include what should have occurred?

[Appleby]

Hi Kate,

The amount is taxed in the year of distribution.

As you may already know, if the failure to withdraw the RMD amount by the deadline is due to a ‘reasonable cause’, the participant may request a waiver of the excess accumulation penalty from the IRS

[Guest crosseyetester]

A participant turned 70 1/2 on 11/1/99. Client told us the participant had elected to defer benefits but never forwarded to us proper documentation, despite requests. Now the client says participant never made such election and has asked us to make payments retroactive to 11/1/99.

Two questions related to calculating interest on those missed payments. Should interest be calculated on all back payments, or only on those payments missed since effective date 1/1/04?

Also, are there any guidelines on proper interest rates to be using? We have been using 3% but do not know if we should be increasing that.

Thank you.