If a plan uses a cash basis to determine a Required Minimum Distribution (and there is an accrued contribution), is there a plan defect? The proposed regulation clearly states that an accrual basis should be used, but the regulation is neither temporary nor final, only proposed - so would the fact that the regulation is only proposed be enough to prevent using a cash basis from being a plan defect?

I don't think it matters how the plan is run (cash or accrual) the 70 1/2 distributions have to follow the rules as laid out - temporary regs is all we have.
in other words, it is not a 'plan defect' - in fact I doubt the plan gets that detailed in how to calculate the minimum distribution (e.g. accrual vs cash)- just that it has to be done.
Therefore, I would say its more of a miscalculation on the required amount rather than a defect.

Tom,

Thanks for the reply, but what does that mean in practical terms? Would you say that using a cash basis rather than accrual basis is an operational defect (probably what I should have asked in the first place rather than plan defect)? Does a 50% penalty apply to the participant for the amount of the underpayment? If it is not a plan defect, does that mean it is not a qualification issue? Are you saying that no correction program (APRSC, VCR, etc.) would need to be used?

under APRSC you can make corrections for opeartaional defects which is what would say you have.
document says to pay minimums, you 'tried' but didn't calculate enough, as a result, the amount is porbably insignificant, you have the procedure in place to pay the ee, etc.

when you said 'plan defect' I thought you referred to 'form defect' which would kick it out of self correction