Save time with our cheat sheets, fact sheets, checklists & books!

December 2, 2011

Definition of Retired- Rehired After one day voids retirement PLR 201147038

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

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

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

Annual Benefit Limit

Definition The annual benefit limit for defined benefit plans is the lesser of: A) 100% of the participant’s average compensation for his or her highest

Be among the first to know when

IRA Rules
Change