Allocation waiver for retired employee subsequently rehired on a part-time, on call basis

The employee (past NRA) retired in early 2024 and due to various business needs the employer reached out to rehire the employee on a part-time/on call basis.   The plan provides an allocation waiver for retirement for profit sharing allocations.   There is only 3 months between the retirement date and rehire date.   The employer wants to treat the compensation earned through the retirement date as eligible for profit sharing under the allocation waiver and all income earned upon rehire would be subject to the 1000 hour and last day allocation conditions. 

The plan is not top heavy and uses new comparability with each employee in individual allocation groups and combined tested with a Cash Balance plan. 

Assuming no other testing concerns, would that split allocation be allowed?  

And considering potential testing concerns, the only issue I am seeing is if the allocation based on compensation through retirement does not satisfy the gateway minimum based on full year compensation, the full year compensation gateway minimum would be required.    

I have never seen in done with compensation in the same year. I think the problem with the same year could be do you have a bonafide termination.  There is a rule out there (don't have cite off top of my head) that says a termination isn't bonafide if a person terminates with an agreement they will come back.  If it isn't bonafide the first termination doesn't count.  This came up first in a plan where people were quitting to get a distribution and as soon as they got the check got rehired.   There is an IRS rule that stops that kind of arraignment.   They key to this rule is if there is a firm agreement to rehire the person or if they are at risk of never being rehired.  A bit facts driven. 

I have a number of plans (all DC plans) that have rules that say the following about people rehired after they retire for on call work:

If the plan pays via installments (typically my ESOPs) the person can come back and do some on call work and still get their installment for that year. Normally you don't get paid until the year after your termination.  No retiree is going to give up their annual installment for a few days of work.  The work doesn't pay enough to make up for the lost installment. 

If they do no work >1,000 hours and are employed on the last day they do not get an allocation.  This is designed to allow only one bite of the apple regarding the provision that give an allocation in the year of retirement even if you work <1,000 hours and not employed on the last day.  Check your plan.  In subsequent years such a person might get an allocation as the allocation provision merely says if they terminate after normal retirement age they don't have to have 1,000 hours and be employed on the last day.  If there isn't language that specifically says you that can only happen once it can happen over and over again.  I have some clients that don't care and the person "retires" several times over a few year span of time as they come and go.  They earn so little the subsequent contributions is too small to worry about and if they are asking the person to come back they tend to like them. 

Like I said those only apply to the year after the 1st retirement termination.  I haven't seen it in the same year. 

Check the document and follow it, the plan sponsor making up its own rules based on what it wants to do does not fly. if there is no BIS then the document should say the person re-enters immediately and treated as if (s)he never left, which renders the initial "retirement" moot in my opinion.