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Penalty for Failure to Make Minimum Required Distributions
The starting place for modeling the traditional IRA versus Roth IRA conversion scenarios is to determine the potential payout period of the account and the minimum required distribution percentages for the account pursuant to the controlling distribution elections.
In most cases, however, the income will not be deferred further, because the minimum required distribution will likely exceed the fiduciary accounting income, especially if the IRA portfolio consists substantially of growth assets.
First, the participant's spouse's age would be used in calculating the section 401(a)(9) minimum required distributions from the retirement plan.
In addition to the participant, the participant's spouse's life expectancy would be used to determine IRC section 401(a)(9) minimum required distributions.
The beneficiary designation must require the distribution to the QTIP trust of the income earned by the amounts held in the plan or IRA, unless the minimum required distribution is greater.
If the required distributions are not made, a nondeductible excise tax of 50% of the amount of the minimum required distribution that was not actually distributed is imposed--a stiff penalty on the individual employee.
However, without a beneficiary, the surviving spouse must calculate the minimum required distribution from the rollover IRA based on one life only.
The narrower definition is used for the application of the nondiscrimination rules and for certain minimum required distribution purposes.

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