Separation from Service

Submitted by Gregory C Smith on Fri, 2013-11-22 15:49

Individual age 72 is still working and has 403(b) plan. He wishes to take distributions from the plan. Apparently, he must separate from service to do so. He is working with current employer to “retire” for 30 days and then be rehired for the same job with same benefits and responsibilities. 403(b) plan administrator indicates that should the employer advise of separation from service then OK with them. Will this plan to retire and then be rehired work so that individual can access 403(b) account?



Submitted by Alan - IRA critic on Fri, 2013-11-22 16:41

  • Most 403b plans allow employees to take distributions if they meet requirements such as age 59.5 or reach the normal retirement date for the plan. The normal retirement date will certainly have been met, so I wonder if the individual is getting the right info from the plan administrator.
  • If he retires and then “unretires” right afterward, this will expose a gray area for which the IRS has not offered guidance. The issue is that retirement would trigger RMDs for 2013 and thereafter, and the RMDs might have to continue even after he resumes employment. In other words, retirement would cause RMDs to start and there are no provisions for them to stop once the employee retires. Therefore, he should carefully check the accuracy of the plan’s statement that he must retire to take any distributions, whether he rolls them over or not.


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