IRS Highlights Resources for Employers Facing Labor Shortages

There’s not much doubt that the COVID-19 pandemic has taken a strong labor market and turned it on its ear, producing a shortage of available workers.

To help employers navigate these uncertain waters, the Internal Revenue Service is reassuring them that businesses rehiring retirees or keeping employees after they reach retirement age won’t put them crossways with their pension plans.

Many employers, including governmental agencies—public school districts, for example—have had to resort to these measures in order to keep key positions filled. Previously, hiring back workers who retired or retaining those older than the normal retirement age while paying them retirement benefits may have jeopardized the status of their pension plans.

The IRS, however, has posted two new sets of frequently asked questions (FAQs) giving guidance to public and private employers who have pension plans for their employees. These new instructions are aimed helping employers meet their staffing needs while still managing to comply with their pension plan’s qualification rules.

The FAQs explain an employer can usually deal with unexpected hiring needs by rehiring former employees—even if they have already retired and started receiving pension benefits. If the plan permits, these rehired employees can even continue getting pension benefits after they are rehired.

Giving employers another tool to retain older employees, the FAQs also allow employers to make retirement distributions available to existing workers who reach age 59 1/2—or whatever the normal retirement age of their plan may be.

The IRS is also hosting two webinars in October on school labor shortages. Webinar 1 deals with teacher and substitute teacher shortages, while Webinar 2 targets staff shortages, such as bus drivers and food service workers. Follow the links to preregister.

Source: IR-2021-208

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