hmmmm i dont think i know what that was, can you provide details (like how much was too much, was it age dependant, etc.)?
<This is prior law and is therefore no longer directly applicable>
Prior law: Prior law contained provisions that assessed onerous penalties under four different sets of circumstances. Penalties are assessed for excess contributions to an IRA. This is a 6% nondeductible penalty, assessed each year that the excess is not withdrawn. A second penalty is assessed for excess distributions from an IRA and other qualified plans. This is a 15% nondeductible tax on total retirement distributions to an individual, during any one calendar year, in excess of a
predeterminedpre·de·ter·mine
v. pre·de·ter·mined,
pre·de·ter·min·ing,
pre·de·ter·mines
v.tr.
1. To determine, decide, or establish in advance:
..... Click the link for more information. amount adjusted for inflation ($155,000 for 1996). Individuals with
accrued benefitsAccrued benefits
The pension benefits earned by an employee according to the years of the employee's service.
..... Click the link for more information. of more than $562,500 on Aug. 1, 1986 are allowed to make a grandfather election that could exempt certain distributions from the excess distributions penalty. The third penalty provision is a 15% Federal estate tax (over the regular Federal estate tax) for excess retirement accumulations. The
excess accumulation Excess accumulation
The amount of a required minimum distribution that an IRA holder fails to remove from an IRA in a timely manner. Excess accumulations are subject to a 50% IRS penalty tax. is the value at the date of death in the decedent's retirement plans over the present value of a
single life annuity Single life annuity
An annuity covering one person. A straight life annuity provides payments until death, while a life annuity with a guaranteed period provides payments until death or continues payments to a beneficiary for a guaranteed term, such as ten years. with annual payments over predetermined amounts. The fourth penalty provision is a 10%
excise tax Excise Tax
1. An indirect tax charged on the sale of a particular good.
2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS.
Notes:
1. on premature distributions from IRAs and other qualified plans. This penalty generally applies to distributions made before age 59 1/2 (with some exceptions). New law: Sec. 4980A(g), as amended by SBJPA Section 1452(b) (effective for years beginning after 1996 and before 2000), suspends the 15% excess distribution excise tax from IRAs and other qualified plans. This is an extremely valuable planning tool for any client with significant IRA and other retirement accumulations as a result of either corporate rollovers or successful retirement plan growth. The suspension of the 15% penalty on excess distributions not only avoids the excess distribution penalty for the three-year suspension period, but also can allow the taxpayer to reduce the plan total (in order to avoid the 15% penalty on excess retirement accumulations). Planning opportunity: Practitioners should carefully review their client lists to determine which clients may be subject to both the excess distributions and excess retirement accumulations penalties. Projections should be made using reasonable earnings assumptions for clients' current retirement balances and assumptions about their future
income tax brackets Noun 1. income tax bracket - a category of taxpayers based on the amount of their income
income bracket, tax bracket
bracket - a category falling within certain defined limits under different
life expectancy Life Expectancy
1. The age until which a person is expected to live.
2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. scenarios. These projections can be used to explain the likelihood of the application of these two penalties, and a joint decision can be made with the client as to the appropriateness of accelerating IRA and other plan distributions during the three-year suspension period for the excess distributions excise tax. The projections related to this issue are very complex. The factors to be considered include not only assumptions about retirement account earnings, future tax rates and life expectancy, but also present value calculations comparing potential future penalties to current income taxes (which would be voluntarily accelerated if earlier distributions are chosen).
But, keep it simple, like "Mary had $1000 and Joe had $1000... 
