The intent of the tax on excess accumulation is to ensure that taxpayers receive most of their retirement benefits during their lifetime. In order to avoid this tax, you must begin receiving payments from a qualified retirement plan no later than your “required beginning date”, and the payments you receive cannot be less than the required minimum distribution.
Required Beginning Date
In avoid to avoid the additional tax, you must start receiving distributions from a qualified retirement plan by April 1 of the year following the calendar year in which:
you reach age 70 1/2 , or
you retire from employment with the employer that maintains the retirement plan.
But if you are 70 ½ or older and have not yet retired, but the plan requires you to start receiving distributions by April 1 of the year following the calendar year in which you reach age 70 ½, that will be your required starting date.
Also, if you are at least a 5% owner of the company that maintains the retirement plan, you must start receiving distributions by April 1 of the year following the calendar year in which you reach age 70 ½, regardless of when you retire.
Required Distributions
By the required starting date, you must receive either:
Your entire interest in the plan, or
Periodic distributions, such that the annual amounts are calculated to distribute your entire interest over your life or life expectancy, or over the joint lives or life expectancies of you and a designated beneficiary. You can receive periodic distributions over a shorter period of time.
Tax on Distributions Not Made
If you do not receive the minimum required distributions, or receive less than the required amount, you could be subject to a 50% excise tax on the amount of the required distribution that was not made.