Deferring RMD for “still working” 401K
Does the code allow (or address in any way) someone who works merely one day in the next calendar year to delay the RMD from the employer 401K plan. For example, employee turns 70.5 on April 1st 2017. Retires on January 1, 2018. Therefore calendar year of retirement is 2018 for 401K……so….. first required minimum distribution would be April 1, 2019 from that employer sponsored plan (the April 1 of the year following the “calendar” year of retirement).
So by working 1 day in 2018, he can defer the RMD for an additional year as opposed to retiring on December 31, 2017? Thanks for the help. I cannot find where the IRS addresses this specific issue.
Permalink Submitted by Alan - IRA critic on Mon, 2017-11-27 17:41
The 401k administrator will be guided by the “date of retirement” recorded by the employer. The employer can adopt their own plans on how to measure when retirement occurs, eg. # of hours worked per day, month, etc. Once the employee falls short of the plan’s requirement, they are deemed retired and RMDs must begin. Semi retired employees need to determine exactly what is required to avoid being deemed retired which would irrevocably trigger RMDs from that plan. The IRS does not publish details regarding HOW the plan defines when retirement has occurred. Therefore, if an employee wants the RBD to be extended for another year, they should discuss ways to have their retirement date extend beyond 12/31. The RMD rules then operate as you have described.