Still-Working Exception

Submitted by Chung-Chu Hsieh on Thu, 2023-02-23 16:28

A retiree has two workplace retirement accounts: a 457(b) plan with the most recent employer, and a 401(k) plan with an earlier employer. The person is currently 71 years old and can roll over the 401(k) funds into the 457(b) account. If the person can qualify for the still-working exception by going back to work for the most recent employer before RMD begins, then RMD from the 457(b) funds can be delayed. How about the funds that are rolled over into the 457(b) plan from the 401(k) plan? Can the still-working exception be applied to the rollover funds from the 401(k) plan to delay its RMD? If so, what precautions or setups need to be taken to satisfy the tax law?



Submitted by Alan - IRA critic on Thu, 2023-02-23 17:13

  • The “still working exception” will apply to all the funds in the current employer plan including rollovers from other accounts as long as the current employer plan recognizes the exception in the first place. However, even if the current employer forces out an RMD, it is a plan RMD only and not a statutory RMD. Therefore, it could be rolled over. This person’s first RMD distribution year will be the year in which they reach age 73. To avoid an RMD from the 401k plan, it must be directly rolled into the 457b prior to the year in which the person will reach 73. For RMDs to be deferred the person will have to continue employment beyond the end of the year in which they reach 73, and beyond the year they reach 74 if they are to benefit from more than one year of deferred RMDs.
  • Note that extended deferral of RMDs while working can concentrate the RMDs into fewer years and therefore increase them once they begin and also their marginal rate.


Submitted by Chung-Chu Hsieh on Thu, 2023-02-23 19:48

THANK YOU for the explanation and the reminder of the downside of delaying RMDs.



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