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Guest Chuck Yanikoski

I have never seen this issue specifically addressed. However, in general the IRS recognizes that people may terminate employment, even retire, then return to work. In regular (defined benefit) pension plans, there are provisions for this, and pension payments may begin even if the retirement or termination does not prove to be final.

 

My own view would be that if there is an arrangement where the employee has a reasonable expectation of returning to the same job -- for example, in the case of a leave of absence, or in a case where the layoff is specified to be temporary -- then this is not a termination. But if the employer has laid off plan participants and they have a mere possibility, not a promise (even an unsecured promise) of re-employment, then they are terminated. If they are subsequently re-hired, then their status changes again, but it does not negate their previous termination.

 

In the absence of regulation or case law, you would certainly have a good argument along these lines. But we might need a pension attorney to weigh in on whether rules or cases on this situation already exist.

 

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