Partner Compensation at Retirement

[401kAllTheWay]

Working on the dark here but trying to find a resolution. When a partner from a firm retires, I am assuming they receive some sort of retirement benefits from the firm. from what I understand, these payments are similar to 409(a) payments but not 409(a) payments. 
 

if a retired partner returns to work as an employee but still receiving retirement benefits under a retired partner, what is their eligibility for 401(k). Employees and partners are eligible to participate in 401(k) though both have a different ways to contribute and being auto enrolled.

The plan document has no specific mention of being excluding if retired partner is rehired as an employee. It’s the retirement benefits they may be receiving is what is throwing this off. 
 

thank you. 
 

 

[Lou S.]

Unless the Plan excludes them somehow, I don't see why they would not be an eligible employee if they were rehired as a W-2 employee.

Now if you are wondering about what compensation is eligible for Plan benefits, again that would be defined in the Plan document.

[Bill Presson]

In my work with many professional service firms, they do these kinds of non qualified deferred comp programs quite often. Usually the partner will "retire" as a partner and continue working for 2-5 years. Those plans would almost always use 3401(a) as the definition of compensation because those non qualified distributions are considered earned income in that definition. Allows the former partner to still defer into the 401(k) plan if desired.

[QDROphile]

Next, consider what “retirement” means for purposes of 401(a)(9), especially when “current” compensation is minimal.

[401kAllTheWay]

This has been very helpful. I appreciate all of your responses as we navigated through some tougher questions.