Tips for VCP Submissions for Required Minimum Distributions
To process VCP applications as efficiently as possible, it’s important to start with a correctly completed submission. Use these tips to avoid common mistakes when completing Form 14568-H (Schedule 8) for a VCP submission disclosing a required minimum distribution (RMD) failure:
- When you complete the table identifying the failure in Section I, use a separate line for each plan year the failure happened and identify for each plan year: the number of affected participants and the total missed RMD amounts. It’s important to correctly identify all years of the failure.
Example: Terry, a former participant in the ABC, Inc. 401(k) plan attained age 70 ½ in 2014. The ABC, Inc. 401(k) plan didn’t pay Terry his RMD until 2016.
An RMD was due to Terry on April 1, 2015 (April 1 of the year following the year that Terry attained age 70 ½). To complete the table in Section I, the year of failure would be the year Terry attained age 70 ½ and every year after that the plan didn’t pay him an RMD. Therefore, the plan years of the failure are both 2014 and 2015 because his RMD was paid in 2016.
When ABC, Inc. lists the number of affected participants and missed RMDs in Section I, they should include Terry’s missed RMD for each year of failure (2014 and 2015), and list each year on a separate line in the table.
- Only include the total amount of missed RMDs, not earnings.
- For defined benefit plans, you should confirm the adjusted funding target attainment percentage and indicate whether the plan is or will be subject to any IRC section 436 restriction when the distributions will be made.
- Complete Form 14568 Appendix C, Part I, Section IV – the method to locate and notify former participants and beneficiaries (or provide this information in another format.) Remember that the IRS Letter Forwarding Service and Social Security Letter Forwarding Service programs are no longer available for this purpose.
- If requesting excise tax relief under IRC section 4974, indicate on the Form 14568 Appendix C, Part I, Section VI the failure number for which you’re requesting it. Don’t leave the failure number blank.