Advanced Underwriting Consultants

Question of the Day – March 18

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: My 73 year old client retired earlier this year from her job as a public school teacher.  She has a Section 403(b) account.  Since her retirement, she has agreed to be a substitute teacher for the same school district.  Is she required to take required minimum distributions (RMDs) from her account?

Answer: To our knowledge, the IRS has never given a definitive answer to this question.

With regard to a 403(b) account, RMDs must begin by April 1 of the year after the later of the following:

  • The year in which the participant turns 70 ½, or
  • The year in which the participant terminates employment with the employer sponsoring the 403(b) plan.

There are special rules with regard to the commencement of RMDs if the account balance includes 403(b) amounts that existed prior to 1987.  We will ignore these for the purpose of this question.

Does retirement with continued substitute teaching constitute termination of employment?  Does it matter how much substitute teaching is actually done by the participant?  We don’t know for sure.  The client will have to seek and rely on the opinion of the plan administrator and his or her tax advisor with regard to this question.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.