Retiree check pension plan

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Dear Joan:
I worked as a technician for a large corporation. While there, we would sometimes be sent to other mills located throughout the country for special projects that would last several weeks. When I retired, my boss and also my immediate supervisor asked if I would consider coming back occasionally to do the same thing. I would have loved it.

When my supervisor tried to set it up with Personnel they referred her to the Legal Department where she was told that would be illegal because of ERISA rules.

I guess what bugs me is that I know several people, including a next-door neighbor, who have gone back to the same company. A V.P. friend of mine said, "maybe hundreds" when I asked if he knew of any retirees back at work part-time.

My former boss asked me last week if I would sign up with a temporary agency so he could legally hire me back. Is that silly or am I silly?

A friend in the Pension department said it's all in the terminology used when you come back. My daughter works at a different corporation out west. She says they use retirees all of the time to sub for vacations. AARP Magazine had an article stating that if you would like to supplement your income, go to your former employer first. They would love to have you. (Evidently, even if they want you they can't have you.)

If this is the law, who does it help? My pension is $99 per month, in case you think I'm being greedy.

Answer:
It's no wonder you and your company are frustrated! Many companies are struggling to keep the trained talent they are losing as the population ages and retires. And many talented retirees want to continue to contribute to their former companies. The 90's promises to produce a labor shortage, so companies will be pressing for favorable legislation to help them stay within the law as they seduce their long-term employees with incentives to keep working.

Without knowing the specifics of the situation, I can't second guess your Personnel and Law departments. What I can do is shed some light on some possibilities that you can check out with your company.

There is no flat-out ERISA (Employee Retirement Income Security Act) rule that states that you can't return to work for your former employer. There are many variables in pension plans, however, which makes generalizations on this topic very difficult. What you have to do is examine the terms of your pension plan.

I asked Steven Huff, attorney with the Milwaukee firm Reinhart, Boerner, Vandeuren, Norris and Rieselbach, for some guidance on the issue. Huff, who concentrates his practice in the employee benefits area, provided the following advice: "If you have a qualified retirement plan, the plan will govern and may restrict your pension benefits. If you have such a plan, ERISA permits (but doesn't require) your company to suspend your pension benefits for the period of time you return to work for your company.

If your employer's plan is a "defined contribution" plan such as a profit sharing or 401 (k) plan, your account balance stays the same and any suspension of benefits should simply delay the receipt of your benefits. However, if your employer's plan is a "defined benefit" pension plan which provides you with a monthly stream of income, a suspension of benefits may result in reduced benefits over your lifetime. Something to keep in mind here is that your reemployment might count for additional benefit accruals under the plan, which could ultimately increase your pension benefit.

The year after you reach age 70 1/2, your benefits can't be suspended any longer. Again, the terms of the plan and the benefit payment options you have selected govern these issues. Check with your former employer to see how your plan operates."

The "terminology" your friend in the Pension department mentioned is important. One of the terms he's probably referring to is "independent contractor." If you return to work as an "independent contractor, and not as an "employee" as defined by your pension plan document, your pension benefits might not be suspended.

The IRS has a 20 point test it uses to determine if you are indeed independent or really just doing the same job you always did when you were previously employed. This is to the employees' benefit, since we wouldn't want companies to be able to indiscriminately change our status to "independent contractor" to avoid paying benefits.

Some of the points the IRS looks at deal with the duration of the job you're hired to do and the amount of supervision you require. So, if your boss wants you to come in and do exactly the same job you did before you retired, it is likely you would be an "employee" and your benefits could be suspended until you terminate your employment. However, according to the IRS guidelines, you may be able to do special projects or a distinct part of the job you formerly held in an effort to qualify as an independent contractor under the IRS's 20 point test. If you can do this, your pension benefits should not be suspended. Look at Revenue Ruling 87-41 and Form SS-8 for guidance to determine whether or not you would be called an "employee."

In spite of these technical and legal regulations, you are in a great position. You obviously have a strong performance history and are highly valued by your former company. I hope they will work with you to capitalize on the wealth of experience you can offer.

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