RMD and Still Working: The Employer Plan Exception in 2026

If you are still working at age 73 or older and do not own 5% or more of the company, you can delay required minimum distributions from your current employer's retirement plan until you actually retire. This exception, found in IRC §401(a)(9)(C), applies only to qualified employer plans like 401(k)s at your current job. It does not apply to IRAs, and it does not apply to plans from former employers. Here is how the rule works and what it covers.

The still-working exception

The general rule requires retirement account owners to begin taking RMDs by April 1 of the year after they turn 73 (under SECURE 2.0). The still-working exception creates a carve-out: if you are still employed by the company that sponsors the plan, your "required beginning date" is pushed to April 1 of the year after you separate from service.

This means a 78-year-old who is still working full-time at the same company can continue contributing to the company 401(k) (up to the $24,500 elective deferral limit, plus the $8,000 catch-up contribution for those 50 and older) without having to simultaneously take money out as an RMD.

The exception exists because Congress recognized that forcing withdrawals from a workplace retirement plan while the employee is still earning income and potentially contributing to the plan would be counterproductive.

Which accounts qualify

The still-working exception applies to qualified employer plans at your current employer only. This includes:

• 401(k) plans
• 403(b) plans (tax-sheltered annuities)
• 457(b) governmental plans
• Other qualified plans under IRC §401(a)

Plans from former employers do not qualify. If you left a previous job and still have a 401(k) balance with that company, RMDs from that account must begin at age 73 regardless of your current employment status. One strategy some workers use is rolling old employer plan balances into their current employer's plan (if the plan accepts incoming rollovers), which would bring those balances under the still-working exception.

The 5% ownership rule

The still-working exception has one major restriction: it does not apply if you are a "5-percent owner" of the business. Under IRC §416(i), this includes anyone who owns 5% or more of the outstanding stock or capital/profits interest of the employer.

Ownership is determined as of the last day of the plan year ending in the calendar year you reach age 73. If you cross the 5% threshold at any point, the exception no longer applies and you must begin RMDs on the standard schedule.

This rule primarily affects small business owners, partners in professional firms, and majority shareholders. Rank-and-file employees at large corporations are almost never affected by this restriction.

What happens when you retire

Once you separate from service (retire, quit, or are terminated), the still-working exception ends. Your required beginning date becomes April 1 of the year after you separate from service.

For example, if you retire on June 30, 2026, at age 76:

The same two-RMDs-in-one-year issue applies here, just as it does for first-time filers at age 73. If you delay the first post-retirement RMD to the following April, you will need to take two distributions in that calendar year.

IRAs are never exempt

A common misconception is that the still-working exception applies to all retirement accounts. It does not. Traditional IRAs, SEP IRAs, and SIMPLE IRAs are always subject to RMDs starting at age 73, regardless of whether you are still working.

This distinction matters for workers who have both employer plans and personal IRAs. You may be able to delay distributions from your current 401(k), but your IRA RMDs must begin on schedule. The IRA RMD is calculated based on the combined December 31 balances of all your traditional IRAs, using the Uniform Lifetime Table factor for your age.

If you are 73 or older and still working, it may be worth considering whether to roll your traditional IRA balances into your current employer's plan (if the plan allows it) to bring them under the still-working exception. This is a significant decision with implications for investment choices, fees, and beneficiary options, so discuss it with a financial advisor before proceeding.

Use the RMD calculator to estimate your IRA distributions, or see the 401(k) tax savings calculator to model continued contributions while you are still working.