“still working exception” for delaying the start of RMD

Submitted by Robert chiurazzi on Thu, 2020-11-05 18:31

My current employer Profit Sharing Plan Administrator informed that the plan has an “still work exception” and is IRS approved. I am full vested. I am working two days a week in the dental field as an Oral Surgeon. At 71 1/2 I still enjoy working.
The question is can I transfer my previous employer IRA into this plan before end of 2020. This would allow me to delay the RMD for 2021. I am aware that I would have to work until Jan 1 2022.

Ed Slott 2018 Retire Safe & Secure stated on page 242 that this transfer was not allowed. please clarify
.

Thank you.



Submitted by Alan - IRA critic on Thu, 2020-11-05 18:51

  • First of all, your current employer plan sets the hourly parameters to qualify for the “still working” exception. This is plan controlled, not IRS controlled, so be sure you understand what your minimum work requirements are to still qualify for the exception. The year this is determined is 2021, the year you hit 72. Once you no longer qualify and an RMD distribution year is triggered, your future RMDs from this plan must continue no matter how much you work after that.
  • I don’t Ed’s book, and I don’t know if your prior plan is actually an IRA (eg SIMPLE IRA) or a qualified plan like a 403b or 401k. Regardless of what type of plan this actually is, it is up to your current employer whether they will accept rollovers from that type of plan. If your plan will accept the rollovers, I don’t know why p 242 would indicate that type of transfer was not allowed. It is actually a popular strategy to roll accounts that are otherwise subject to RMDs into the current plan where employee is still working because it pushes off the RMDs for a few more years. But keep in mind if you accumulate too much in these plans and if you work until 80, your RMDs will be quite large at that time and tax rates could be higher. Of course, you also need to be sure you current plan offers the investment options and costs that are desirable. 
  • Again, I have no idea why Ed would indicate this is not allowed. Do you think he was stating that the transfer was not allowable or that it would not stop the RMDs? Reread that page to see what the total context was, because it does not make any sense to me if your plan will accept the rollovers. And you do need to roll these plans over by year to end to eliminate an RMD from the plans you are rolling over for 2021.

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