The party responsible for paying the penalty in such cases will be the beneficiary of the 401(k) plan.
You may want to start by finding out who the beneficiary is, if you have not already done so.
The next step would be to find out the distribution options that the beneficiary was required to use to withdraw the assets from the plan. This will help you to determine the penalties that may apply.
I recommend working with a professional, who can work with the IRS to have the penalties waived or reduced. The IRS has shown leniency in instances where the beneficiaries failed to withdraw the amounts because they were unaware of the withdrawal requirements. See page 31 of IRS Publication 575 for further information.
For more insight, read 'Tis The Season For Required Minimum Distributions.
This question was answered by Denise Appleby