Industry News

On October 22, 2021, the Internal Revenue Service (IRS) issued new guidance in the form of two frequently asked questions (FAQs) that address existing pension plan qualification rules when rehiring retirees or retaining employees after retirement age. The guidance for public and private employers is intended to help relieve labor shortages related to the COVID-19 pandemic by assisting employers to encourage retirees to return to the workforce and for experienced employees to stay in the workforce.

Generally, the IRS is reminding employers that they will not jeopardize the tax status of their defined benefit (DB) pension plans if they rehire retirees or permit distributions of retirement benefits to current employees who have reached age 59-1/2, or the plan’s normal retirement age.

Under the FAQs:

• An employer can generally 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; and
• An employer can generally choose to make retirement distributions available to existing employees who have reached age 59-1/2 years or the plan’s normal retirement age, which may help retain employees that are eligible for retirement.​

The FAQs are available here.