Can f/t employee continue 401(k) contributions after 70 1/2?
Fact set: my client is a f/t employee of a large bank and wants to continue making contributions to his 401(k) after reaching 70 1/2. I told he him cannot. He says his HR department says he can. I think they’re wrong. Where is it written that he cannot so I can show him? Thanks!
Permalink Submitted by Alan Spross on Tue, 2011-05-03 03:50
He can contribute as long as he is employed. I will try to find the exact cite, but under the DOL guidelines no qualified plan can deny contributions based on age. In fact, even SEP and SIMPLE IRAs can receive contributions regardless of age, even though for IRAs the RMDs must also start at 70.5.
A traditional IRA is the only retirement account that cannot accept regular contributions at 70.5 and beyond, and this is stated in Pub 590. For these other plans, it is assumed that contributions can be made and it they cannot, the tax code would so indicate, like it does for TIRA contributions.
Permalink Submitted by Shirley Hall on Wed, 2011-05-11 16:54
Yea you can. I am over 80 and have continued to contribute. However be careful that when you do retire that if the employer allows a 50% rollover to an IRA that you might have to base your rmd amount on the total in the fund of the previous year divided by the RMD factor and they might cash out the total amount rather than the amount based on the portion you rollover. I am in the process of investigating this matter right now as I will be receiving distributions from the 401K on a monthly basis and am trying to decide if their distributions will meet my IRA requirements if they cash out distribuions based on the amount of the money being transferred to an IRA and the other half based on the amounts they pay out.
Shirley