The 457 plan administrator would determine his status according to criteria included in the plan provisions. However, your statement that he is “on full retirement” strongly suggests that he is considered just that by the plan despite the new project. To be consistent, he probably cannot defer more compensation into the plan if he is deemed retired. His status with respect to other retirement and non retirement benefits should also be consistent with the 457 plan. There is no established # of hours worked that all plans must adhere to, another reason why this is a plan specific question.

The IRS typically leaves the interpretation of plan provisions relative to defining retirement up to the plan. This means that if the plan indicates that he is NOT retired and therefore he does not take an RMD, the IRS is not likely to question this.

Another possibility here is that the plan does NOT utilize the “still working” exception and requires RMDs for all employees at 70.5. He would be forced to take the RMD, but could then roll it over because it is not a statutory RMD, just a plan RMD. But if he rolled it over, he might be required to prove to the IRS that he actually WAS considered still working under the plan’s definitions.

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