How it works
Normally, RMDs begin at 73 (for those born 1951–1959; 75 for those born after 1959). The still-working exception lets you delay RMDs from your current employer's qualified plan (401(k), 403(b), governmental 457(b)) until April 1 of the year after the year you retire, if all three conditions hold:
- You are still employed by the plan sponsor (retired = exception ends).
- You own 5% or less of the company. Own more than 5% and the exception is unavailable, RMDs start on the normal schedule regardless of employment.
- The plan allows it. Plans can require RMDs at 73 even for active employees; the exception is optional for the plan sponsor. Check your plan document or ask HR.
What it does NOT cover
The two things people get wrong:
1. IRAs are never covered. Your traditional, SEP, and SIMPLE IRAs owe RMDs on the normal schedule even if you work until 90. The exception applies only to employer plans.
2. Old employers' plans aren't covered. The 401(k) at the company you left in 2019? RMDs start at 73, working or not. Only the plan of your current employer qualifies.
1. IRAs are never covered. Your traditional, SEP, and SIMPLE IRAs owe RMDs on the normal schedule even if you work until 90. The exception applies only to employer plans.
2. Old employers' plans aren't covered. The 401(k) at the company you left in 2019? RMDs start at 73, working or not. Only the plan of your current employer qualifies.
Example. You're 74, working full-time. You have: (a) a 401(k) at your current employer, (b) a 401(k) from a prior employer, (c) a traditional IRA. You own 0% of your employer and the plan allows the exception. Result: the current 401(k) can wait until you retire. The old 401(k) and the IRA both owe RMDs this year, the IRA's RMD can be aggregated with any other IRAs you hold, but the old 401(k)'s RMD must come out of that plan.
Planning notes
- Rollover trap. Rolling an old 401(k) into your current employer's plan can bring those dollars under the exception's umbrella, but only if the plan accepts rollovers and you understand the trade-offs (investment options, fees, creditor protection). Don't move money solely for this without comparing the plans.
- The retirement year. In the year you retire, RMDs begin. Your required beginning date becomes April 1 of the following year, and remember, using the April 1 extension means two distributions in one calendar year.
- 5% owners: no exceptions, ever. If you own more than 5% of the business, RMDs start at 73 even if you're still running the company full-time.
- 403(b) and 457(b) nuances. 403(b) plans generally allow the exception; governmental 457(b) plans have their own distribution rules worth confirming with the plan administrator.
Disclaimer. Educational purposes only, not tax, legal, or financial advice. Plan-specific rules vary; confirm with your plan administrator and a qualified tax professional. IRS Publication 590-B is the authoritative source.