Sham Termination and my 403b

[Guest rosswolfe76]

Anyone who can address my situation would be very much appreciated by me. Here are the details

1. I am 56 years old (so not yet 59.5).

2. I am a professor at a church-related college, so I have a 403b.

3. Guidestone, the agency that has my 403b and that used to fund annuities at a floor of 6% (going back at least to the 1990s), has announced that beginning January 1, 2011, they will have no floor for funding annuities and will drop their funding rate down to 3.5 percent for annuities in early 2011.

4. With the principal in my account right now, at the 6% funding rate, I would get a monthly annunity of $2500 or $30,000 a year. It would be in equal monthly payments. I realize that this $30,000 would be taxable income.

5. My university says that they would be willing to rehire me full-time in January so that I could continue teaching (with a new 403b starting out at zero) after I formally retire to claim the higher funding rate for the annunity.

6. Guidestone seems to be about to advise the university not to do that for me because it would be a "sham termination." They are correct. It would be. I want the higher 6% rate, and I want to continue to work.

7. As I read about "sham termination" online, I do not see that it is wrong in the eyes of the IRS unless it is done to avoid paying taxes. In my case it would be done to capitalize on the higher funding rate, which is about to disappear. I would be paying more tax to the IRS due to drawing the annuity.

Is what I want to do illegal or unethical or improper in any way? Today, in speaking to the Guidestone rep, I said, "So, if I had been less candid about my motives, if I had said that I was retiring fully intending to stop work and then decided that I just couldn't be away from the classroom, you would have no problem with my current employer rehiring me full time." He said, "Sure. That would be fine." It seems to me that it should either be right or wrong for me to go back to work full time at my current employer after retiring and that scrutinizing motives is extraneous. I can see that Guidestone would want as few people as possible getting an annuity at the higher 6% rate and so they would frown on my proposal, but I don't see why the IRS would regard this particular sham termination as improper.

[PensionPro]

Check out this prior discussion:

http://benefitslink.com/boards/index.php?showtopic=43314