Actively employed for RMD purposes

[Fisher]

Would a substitute teacher over age 70 1/2 be considered actively employed, for RMD purposes, if on the "call list", since there is still an employee-employer relationship, even though they may not have worked any toward the end of the calendar year.

[Guest Mxyzptlk]

Would a substitute teacher over age 70 1/2 be considered actively employed, for RMD purposes, if on the "call list", since there is still an employee-employer relationship, even though they may not have worked any toward the end of the calendar year.

I am interested in a variation on the above scenario in which a teacher has formally retired but still works for the district from which she retired, either as a substitute or in some other capacity than her former position of full-time classroom teacher.

I have seen reference to the "still working exception" but the actual language of the rule is:

§1.401(a)(9)-2. Distributions commencing during an employee's lifetime. Q&A 2

Q-2. For purposes of section 401(a)(9)©, what does the term required beginning date mean?

A-2. (a) Except as provided in paragraph (b) of this A-2 with respect to a 5-percent owner, as defined in paragraph © of this A-2, the term required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains age 701/2 or the calendar year in which the employee retires from employment with the employer maintaining the plan.

(b) In the case of an employee who is a 5-percent owner, the term required beginning date means April 1 of the calendar year following the calendar year in which the employee attains age 701/2 .

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Thus, a person who "retires from employment with the employer maintaining the plan" but continues to work for the district arguably could not postpone their required beginning date (RBD)--because they retired, regardless of whether the person continues to work for the employer. It hinges on whether "retires" means a formal withdrawal from employment such as the completion of the application which begins state pension benefits (and subsequent work for that employer is irrelevant) OR simply not working in any capacity for the "employer maintaining the plan" for any full calendar year even after formal withdrawal/beginning the state pension benefit.

Considering the penalty for being wrong is 50% of the postponed RMD amount, the stakes are huge. I have not found any clarification in Notice 96-67, 1996-2 C.B. 235; Announcement 97-24, 1997-11 I.R.B. 24;

Announcement 97-70, 1997-29 I.R.B. 14; Notice 97-75, 1997-2 C.B. 337; Announcement 98-63,

1998-2 C.B. 58

which were cited in this primer:

http://www.steptoe.com/assets/attachments/341.pdf

A sub-issue is does continuing to participate in the plan through post-formal retirement contributions into the 403b (if allowed) make a difference? I don't think it is possible to contribute to the state pension system without formally "un-retiring" which begs the question of whether "un-retiring" lets you postpone the RBD or the first retirement irrevocably = "retires" for the purposes of the RBD rule.

Any tips would be greatly appreciated.