Americans who keep working past age 73 have a tax advantage hiding in plain sight: they can postpone required minimum distributions from their current employer’s 401(k) plan, potentially shielding six- or seven-figure balances from forced taxable withdrawals for years. The rule, rooted in federal statute and reinforced by the SECURE 2.0 Act of 2022, ties the required beginning date for distributions to the later of the year a participant turns 73 or the year that participant actually retires. But the exception is not automatic, and not every plan offers it.
Why the Still-Working Exception Matters in 2026
For anyone still employed at 73 or older, the financial stakes are straightforward. Without the exception, a retiree must begin pulling money from tax-deferred accounts on a schedule set by the IRS, with each withdrawal taxed as ordinary income. Larger balances mean larger mandatory withdrawals, which can push a household into a higher bracket, increase Medicare premiums, and trigger the net investment income tax. The still-working exception lets an employee sidestep that cascade, but only for the 401(k) held by the employer where the person is currently on the payroll.
The IRS spells out the mechanics directly. The required beginning date for a 401(k) is April 1 of the year after the later of the year the participant reaches age 73 or the year the participant retires. That language means the clock does not start until the worker leaves the job, as long as the plan document itself permits the delay. Plans from former employers, IRAs, and accounts where the participant owns more than 5 percent of the sponsoring business do not qualify.
The hypothesis that plans offering this exception retain older workers who might otherwise quit solely to manage RMD timing is plausible but unproven. No publicly available IRS or Treasury dataset tracks how many participants aged 73 and older have used the exception since SECURE 2.0 took effect. No plan-sponsor survey in the reporting record quantifies how many 401(k) plans have adopted the provision. The absence of that data is itself a gap worth watching, because it means neither policymakers nor participants can measure how widely the benefit is actually available.
SECURE 2.0 and the Statutory Framework Behind the Delay
The legal architecture starts with 26 U.S.C. Section 401(a)(9), which sets out minimum distribution requirements for qualified plans and includes the 5 percent owner limitation that blocks business owners from using the exception. Section 107 of the SECURE 2.0 Act raised the RMD starting age to 73 effective January 1, 2023, and will raise it again to 75 in 2033, according to the Senate HELP Committee’s section-by-section summary of the law. Each increase widens the window during which a still-employed participant can defer withdrawals.
The IRS confirms that some plans allow delaying RMDs until retirement on its required minimum distributions page for retirement topics. IRS Publication 575, which addresses pension and annuity income, also covers the required beginning date rules and the conditions under which the exception applies. The repeated qualifier, “if the plan allows,” is the critical detail. The exception is an option the plan sponsor must elect in the plan document, not a default right that every 401(k) participant can claim.
That distinction creates a real-world split. A worker at a large employer with a well-drafted plan document may be able to defer distributions indefinitely while still employed. A worker at a smaller firm whose plan was never updated to include the provision may face mandatory withdrawals starting at 73 regardless of employment status. The plan document, not the tax code alone, controls the outcome.
Open Questions About Eligibility and Plan Adoption
Several practical questions remain unanswered in the public record. First, no aggregated data from record-keepers or the Department of Labor shows what share of 401(k) plans have adopted the still-working exception. Plan sponsors are not required to report that election in a standardized way, so participants often have to read their own summary plan description or ask their HR department to confirm eligibility.
Second, the 5 percent ownership test can be tricky for small-business owners and partners. Under the statute, anyone who owns more than 5 percent of the business sponsoring the plan must begin RMDs at 73 regardless of employment status. Ownership attribution rules can sweep in family members’ shares, catching people who do not think of themselves as owners. That can surprise long-time employees who received equity over the years and only discover later that the still-working exception does not apply.
Third, workers with multiple retirement accounts face a coordination problem. The still-working exception applies only to the current employer’s plan. A person who also holds a 401(k) from a previous job or a traditional IRA must still take RMDs from those accounts on schedule. Rolling old balances into the current employer’s plan, if the plan accepts rollovers, is one strategy some advisors discuss, but IRS guidance does not guarantee every plan will permit it, and participants must weigh plan fees, investment choices, and creditor protections before consolidating.
How Participants Can Verify Their Own Status
Because there is no public database of plans that have adopted the still-working exception, the burden falls on individual savers to confirm whether they qualify. The first stop is the summary plan description, which should explain when distributions must begin and whether active employees can delay them past age 73. If the language is unclear, participants can ask their HR or benefits office to point to the relevant provision in the full plan document.
For specific questions about how the federal rules apply in an individual situation, the IRS offers phone and written assistance through its online account tools and other taxpayer services. Those resources can help clarify how the required beginning date interacts with continued employment, ownership interests, and multiple plans. However, the IRS will not interpret a particular employer’s plan document; that responsibility remains with the plan administrator.
Financial planners often recommend that workers approaching 73 build a simple checklist: confirm whether the current employer’s plan offers the exception, identify all other accounts that will still require RMDs, and estimate the tax impact of those withdrawals. Even when the still-working exception is available, it may not always be optimal to defer every dollar. Some retirees choose to take voluntary withdrawals earlier, especially in relatively low-income years, to reduce future RMDs and manage lifetime tax exposure.
Policy Implications and What to Watch Next
The still-working exception sits at the intersection of retirement policy and labor-force trends. As more Americans work into their seventies, the gap between those whose plans allow delayed RMDs and those whose plans do not could widen. Two employees with identical salaries and savings but different plan documents may face very different tax bills in their mid-70s, solely because one employer adopted the optional provision and the other did not.
For lawmakers and regulators, the lack of data on plan adoption and usage makes it difficult to evaluate whether the exception is functioning as intended. If Congress wanted to encourage work at older ages, tracking how often participants actually benefit from delayed RMDs would be a logical next step. For now, the still-working exception remains a powerful but unevenly distributed tool-valuable for those who know to ask about it and whose plans are designed to say yes.
