Separation from Service

[Guest ERISAbeing]

Where can I find the definition of "Separation from Service" in the Code and/or in ERISA? If it comes through other guidance, a description of such guidance would b helpful so that I may retrieve it. Thanks in advance!

[masteff]

EGTRRA amended code section 401(k)(2)(B) from "separation from service" to "severance from employment". This loosened the previous standard. You'll want to verify your current amended plan text to determine if you EGTRRA amendments adopted the "severance from employment" language. See also reg section 1.401(k)-1(d)(2) (which has slightly more verbage, but not alot). If your plan does still say "separation from service" then another term you can cross-reference is "same desk rule".

[Effen]

Although I don't disagree with Masteff, it may be helpful to know why you are asking. Multiemployer plans generally don't look at termination the same way single employer's do. Often in a multi, you are never really "terminate", you just haven't worked in a while. Usually they have some sort of internal rule to help classify them. Some plans treat you as active unless you haven't worked during the past 2 years. Other plans will treat you as terminated and will pay out the DC balance if you haven't worked in 6 months, sometimes 2 years, sometimes only at retirement age.

Make sure you read the document and talk to the fund about their past practices.

[Guest ERISAbeing]

EGTRRA amended code section 401(k)(2)(B) from "separation from service" to "severance from employment". This loosened the previous standard. You'll want to verify your current amended plan text to determine if you EGTRRA amendments adopted the "severance from employment" language. See also reg section 1.401(k)-1(d)(2) (which has slightly more verbage, but not alot). If your plan does still say "separation from service" then another term you can cross-reference is "same desk rule".

Thank you both. We are working with a defined benefit plan. We are attempting to explain to our client that a true "separation from service" must occur prior to a distribution. In this case, the participant is "retired," but really just moving from a covered to a noncovered position. We are telling them that this does not constitute a separation from service with the employer. Furthermore, we indicated to them that we need to have a separation from service in order to trigger distribution, then the suspension of benefit rules may apply. This is the reason I was looking to provide them with the Codified definition of "separation from service."

In addition, if our plan does not provide for a length of time where a person not performing services for any participating employer would be considered termed, is there some guidance (IRS, DOL, etc...) as to what is a reasonble amount of time? Effen you mentioned some plans use 2 years - is there guidance, caselaw, etc. . .

Does anyone have any guidance on a standard I heard about which is " the present intent to retire?" It is referenced in IRS Publication 521, but I am not sure if the reference applies in my case. The Publication states, in the context of moving expenses to and from the US, you are permanently retired, "f, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work." I am curious as to whether this is the general standard that the IRS utilizes.

Any guidance would be much appreciated!

Thanks!