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
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.
In addition to group billing and collection capabilities, VPAS(R) Life was enhanced to completely automate minimum required distribution
However, without a beneficiary, the surviving spouse must calculate the minimum required distribution
from the rollover IRA based on one life only.
If age 70 1/2 is reached during 2003, the owner has until April 1, 2004, the required beginning date (RBD), to take the first minimum required distribution
(MRD) from a traditional IRA.
The narrower definition is used for the application of the nondiscrimination rules and for certain minimum required distribution
During the following year, when John was 73 and his wife was 26, the total minimum required distribution
payment received by John was $6,104 greater ($10,729 rather than $4,625) because the change hadn't been made on or before January 1st of that year.