If a participant that is over age 70 1/2 (not an owner) terminates during the plan year, but is then rehired during the same plan year, are they required to begin receiving minimum distributions?

What if they are in pay status and then are rehired in a following plan year, do they have to continue to receive the minimum distributions since they are in pay status or can they opt to stop once they are rehired?

Coincidently, the question about a participant in pay status being rehired came up in our office yesterday as well. I've been waiting with baited breath to see what wisdom others might impart. However, the reason no one is responding may be that there is no specific guidance on this one way or the other, so anything that would be offered would be opinion only. Our technical staff read the available guidance, including secondary sources, and came to the conclusion that it is OK to stop making RMDs upon rehire. Since the regs say that the required beginning date is the later of 70 1/2 or retirement, and since the employee is no longer retired, couldn't that be construed to allow the RMDs to be stopped? We feel that this is a reasonable interpretation given no specific guidance on point. Again, this is just our interpretation and should be used at your own risk.

If the above interpretation is reasonable, I would think a reasonable extension of that interpretation would say that if the employee was rehired within the same calendar year, no RMD would be due for that calendar year.

However, I would not take the position that a person who was terminated in a calender year, then rehired in the next calendar year but prior to the 4/1 deadline was not due an RMD for the calendar year in which they terminated. Such an interpretation would not be reasonable in my opinion.

Heres a question we did not address, but would certainly come up when the person retires again. Do they get the 4/1 deadline a second time?

I'm sure we'll hear from those who dissagree.