At 74, He Went Back to Work and Thought His RMDs Stopped. The Mistake Could Make More of His Social Security Taxable.

About the Role of the Still-Working Exception

The still-working exception only pauses Required Minimum Distributions (RMDs) from a current employer's plan, not from IRAs and old 401(k)s, which continue to require distributions regardless of employment.

What the Still-Working Exception Actually Covers

An employee may be able to delay RMDs from the retirement plan sponsored by the employer for which he currently works, provided the plan's written rules permit the delay.

What the Exception Does Not Do

• It does not stop RMDs from traditional, SEP, or SIMPLE IRAs, which continue regardless of employment.
• It does not stop RMDs from plans maintained by former employers, including old 401(k) accounts.
• It does not apply to someone who owns more than 5% of the business sponsoring the current plan.

Impact on Social Security and Medicare

The distributions that must continue to be taken can raise provisional income, which can push up to 85% of Social Security benefits into taxable income. Additionally, the same income can affect Medicare, as the Income-Related Monthly Adjustment Amount (IRMAA) raises Part B and Part D premiums for higher-income beneficiaries.

Transferring Money to the New Plan

Potentially, money can be moved into the new plan, but the order matters. If the current employer's plan accepts incoming rollovers, eligible money from an IRA or former employer's plan may be transferred into it, provided any RMD already due for the year is taken out first.

Key Considerations

• Confirm in writing whether the current employer's plan allows RMDs to be delayed and accepts rollovers from IRAs or former workplace plans.
• Project the year using the wages and RMDs that will remain, as these figures shape both the taxation of Social Security and Medicare premiums approximately two years later.