RMD delay until participant "retires"

[Flyboyjohn]

There doesn't seem to be a definition of what constitutes "retirement" for purposes of the 401(a)(9)© delay in RMDs until the April 1st of the calendar year following the calendar year in which the employee retires.

Would working (and being paid) for 1 or 2 hours a week be sufficient to support a delay in RMDs?

Would seem to be an area ripe for creative tax planning (almost said abuse).

I'm aware the delay does not apply to 5% owners.

Thanks

[My 2 cents]

If you are talking about an IRA, no delay beyond the April 1 following the year the person turns 70 1/2, no exceptions.

If you are talking about a pension plan (DB or DC), the rule is (for non-5% owners) that the RMDs must begin on the April 1 following the later of the year in which the participant turns 70 1/2 and the year in which the participant separates from service with the plan sponsor.

If the person separates from service and goes to work full-time elsewhere, outside the controlled group containing the plan sponsor, then for 401(a)(9) purposes, the person is retired with respect to that plan.

If the person retains an employee-employer relationship with the sponsor (even if only 1-2 hours per week), then I don't think that person has reached his or her RMD. Not sure how much work is needed to make it a bona-fide ongoing employee-employer relationship though. See a lawyer for that, if one wants to live on the razor's edge.

If the IRS looks at the facts and circumstances and determines that the employee-employer relationship is not bona-fide, then all bets are off. No sympathy here for people caught trying to game the system.

[GMK]

If FICA is deducted from the pay or the pay counts as compensation for plan purposes or like that, I don't see a separation of service. For example, the person wouldn't get a "2A" on line 16 of the ACA form 1095-C.

If the situation is more creative, check with the lawyer as 2 Cents suggests.

[Flyboyjohn]

The code uses the term "retires" vs. the more familiar (to us) "separation from service", wondering if there's any practical difference

[My 2 cents]

If they wanted to make a distinction, they would have had to put it into a regulation.