Requested a ruling: As to whether allowing participants who are eligible for subsidized early retirement benefits to “retire” on one day in order to qualify for the early retirement subsidy, and then immediately return to work with payment of their early retirement pension benefit suspended, would result in disqualification of the Plan under section 401(a) of the Code.
The IRS’ Ruling: Employees who “retire” on one day in order to qualify for a benefit under the Plan, with the explicit understanding between the employee and employer that they are not separating from service with the employer, are not legitimately retired. Accordingly, because these employees would not actually separate from service and cease performing services for the employer when they “retire” these “retirements” would not constitute a legitimate basis to allow participants to qualify for early retirement benefits (which are then immediately suspended.) Such “retirements” will violate section 401(a) of the Code and result in disqualification of the Plan under section 401(a) of the Code. PLR 201147038