Employers that bring back retired employees due to hiring needs related to the COVID-19 pandemic will not run afoul of federal tax laws, the IRS said.
A qualified pension plan's tax status will not be impacted if an employee who's already receiving a pension payment returns to work, according to an FAQ issued by the IRS on Oct. 22.
"For example, if a public school district sponsoring a qualified pension plan experiences a critical labor shortage due to the COVID-19 pandemic that was unforeseen at the time of an individual's prior bona fide retirement, the public school district rehires the individual to help ease the labor shortage, and the plan terms do not define a bona fide retirement in a way that prevents the rehire, the individual's reemployment would not cause the prior retirement to fail to be a bona fide retirement," the IRS said. "Consequently, if plan terms permit, benefit distributions could continue after the rehire."
