What is "Retirement" for RMDs?

[Guest lizano]

I cannot find any guidance about what constititutes "retirement" under 401(a)(9). I doubt that some nominal onging connection with the employer would be sufficient to avoid starting required distributions, but where to draw the line?

While on the subject, once required distributions start, could they be suspended if the retired participant resumes employment at some acceptable level?

[Bird]

I'm not aware of any guidance; for me, any employment income is sufficient to not be "retired from employment." I haven't seen $100/year of something like that yet so haven't had to think about it that carefully.

Not sure about the second Q...I'm inclined to think that once you have retired from employment and established a Required Beginning Date that distributions must continue, even if re-employed.

[david rigby]

I cannot find any guidance about what constititutes "retirement" under 401(a)(9).

I don't find the word "retirement" in 401(a)(9). Have I missed something?

[Tom Poje]

I save everything I can get my hands on, this was Q and A 12, 2003 for the ABA

or you can find their Q and As for prior years at the following website. (I print off a copy of the latest one every year)

http://www.abanet.org/jceb/qanda.html

12. §401(a)(9) – Required Minimum Distributions

Treas. Reg. 1.401(a)(9)-2, A-2(a) provides that except in the case of a 5%-owner, the “required beginning date” is April 1 of the calendar year following the later of the calendar year in which the employee attains age 70-1/2 or the calendar year in which the employee retires from employment with the employer maintaining the plan. Assume that the employee is age 73, is not a 5%-ower, and “retires” on December 31, 2003, as the term “retires” (and related term “retirement”) is commonly used by the employer and under the terms of the employer’s qualified§401(k) plan. However, in fact what this means is that December 31, 2003, is the employee’s last day at work, and the last day for which he is paid or entitled to payment. January 1, 2004 is the first day he is not employed by his employer. When is the employee’s required beginning date?

Proposed Response: For the purpose of Treas. Reg. 1.401(a)(9)-2, A-2(a) “the calendar year in which the employee retires from employment with the employer maintaining the plan” is 2004, not 2003, and therefore his required beginning date is April 1, 2005. Moreover, the employee’s first distribution calendar year (Treas. Reg. 1.401(a)(9)-5, A-1(b)) is calendar year 2004.

IRS response: The IRS disagrees with the proposed answer. When an employee retires is a facts and circumstances determination, but generally an individual’s last day of work is when the employee retires. Other facts, such as the employee returning to work on a sporadic basis after the official date of retirement, could change the answer. But under the facts presented in this question, the last day of service, December 31, is the date of retirement.