What Employers Need to Know About Rehiring Retirees
COVID-19 has caused a labor shortage and forced many employers to find ways to fill open positions, such as rehiring retired employees or retaining employees past retirement age.
Employers will not jeopardize the tax status of their pension plans if they rehire retirees or permit distributions of retirement benefits to current employees who are 59 1/2 years old (or the plan’s normal retirement age).
The IRS issued FAQs to help employers who sponsor pension plans navigate these issues. The FAQs highlight existing ways that employers can meet their employment objectives and still comply with the plan qualification rules.
Generally, an employer can choose to address unforeseen hiring needs by rehiring former employees, even if those employees have already retired and begun receiving pension benefit payments. If permitted under plan terms, those employees may continue receiving the benefits after they are rehired. An employer can generally choose to make retirement distributions available to existing employees who have reached age 59 ½ or the plan’s normal retirement age. This may assist in the retention of employees eligible for retirement.
If you have questions about rehiring retired employees, contact us to discuss your specific situation.
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