Define “still working” re RMD deferral
Is there a definition for “still working” in the context of deferring a RMD for a qualified plan participant who is over 70.5 and not more than 5% shareholder of employer, and “still working” 400 hours per year?
Permalink Submitted by Alan Spross on Mon, 2008-01-28 23:10
I am not aware that the IRS has defined what constitutes “retirement” status under employer plans. For the most part, this is left up to the plan along with the # of hours required to qualify for continued plan participation vrs being “separated from service.” It is best that an employee in phased retirement or on a reduced hourly schedule determine up front from the plan if RMDs are required AND if continued contributions are allowed.
One option a plan has is to NOT allow the RBD to be extended for those over 70.5, even if the employee is not a 5% owner. In this respect a plan is allowed to be more restrictive than what the IRS allows.
There has not been much monitoring done by the IRS in this area and Form 5498 is only required for IRAs, not employer plans.