403(b) Distribution

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#1
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16
Joined:
11-May-2020 5:31pm
Location:
Oklahoma
Employer failed to offer terminated employee opportunity to receive distribution from 403(b) plan upon severance from company 12 years ago, and did not notify former employee of requirement to initiate RMDs once the former employee reached age 70½ which occurred 4 years ago.

Who is responsible for the 50% excise tax (IRC 4974)? The employer, the retirement plan investment firm, or the former employee?

Also, is either the employer or the retirement plan investment firm exposed to any punitive action as a result of late RMDs not offered to employee?
 

#2
HowardS  
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Southern Pines, NC
I would first file 5329's for the missed RMD years with reasonable cause to waive the penalties excise tax. The success rate is extremely high, I've never had one declined and you have a strong reasonable cause.

In my opinion, the taxpayer is responsible for taking RMD's and I expect the employer will take that position. A legal fight would be an expensive last resort. The disadvantage of course is the large accumulated RMD to be taken in the current year but that is better than the excise tax.
Retired, no salvage value.
 

#3
Posts:
16
Joined:
11-May-2020 5:31pm
Location:
Oklahoma
Thanks HowardS - I appreciate your input.
 


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