Rehiring retirees is now an option for addressing labor shortage

Nearly every business owner is feeling the pinch of the tight labor market but one option to consider is rehiring retirees or retain those employees who are past retirement age. Retaining long-term employees with a trusted track record and knowledge of your business can be a tremendous benefit, but this has not always been a viable solution. The Internal Revenue Service recently issued guidance, however, that can help employers do just that.

The IRS published two new frequently asked questions that it added to its web page on coronavirus relief for retirement plans. In an effort to help address COVID-related labor shortages, the IRS reminded employers that they generally will not jeopardize the tax status of their pension plans if they rehire retirees or permit distributions of retirement benefits to current employees who have reached age 59 ½ or the plan’s normal retirement age.

Under the FAQs, an employer can generally choose to address unforeseen hiring needs by rehiring former employees, even if those employees have already retired and begun receiving pension benefit payments. Also, if permitted under plan terms, those employees may continue receiving the benefits after they are rehired. Moreover, an employer can generally choose to make retirement distributions available to existing employees who have reached age 59 ½ or the plan’s normal retirement age. This may assist in the retention of employees eligible for retirement.

Please let us know if you have any questions. Your benefits plan administrator will have more information about your specific plan.

Kristin Ward is a Manager with our Business and Tax Advisory Group. She can be reached at