LSU2020 Posted May 20, 2022 Posted May 20, 2022 I trying to get a sense of how long employers are prohibiting the re-hire of employees who have a 401k account and are under age 59 1/2 to support there is a true termination of employment versus a sham termination. I have seen time periods that range from 3 months to 6 months and less often 12 months. For this purpose, assume there is no pre-termination agreement between the employer and employee to re-hire. Thanks!
Lou S. Posted May 20, 2022 Posted May 20, 2022 Seems like a facts and circumstances determination. Luke Bailey and acm_acm 2
LSU2020 Posted May 20, 2022 Author Posted May 20, 2022 Lou S. thanks. Agree it is ultimately a facts and circumstances, but I do have a number of clients that have policies that start with a general rule no re-hire during X period (unless age 59 1/2 and the plan premittes in-service withdrawals so it is not (arguably) an issue if the termination is extremely short).
Dare Johnson Posted May 23, 2022 Posted May 23, 2022 A good way to prevent sham terminations is to have a wait period on receiving distributions of 30-60 days. Some plans will have an exception to the wait period for those at NRA. acm_acm and Luke Bailey 2
LSU2020 Posted July 15, 2022 Author Posted July 15, 2022 Dare, thanks ... very helpful to hear what others are doing. As you noted the concern is a sham termination by a participant who is not eliglble for an in-service distribution. I know many employers have the rule and then exceptions can be made when the facts are clear there was a termination - for example, a RIF where severance was paid. Again, thanks.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now