In general terms, a boomerang employee is an individual who leaves an organization and later returns. The often-used and well-known example is Michael Jordan and his stint as a baseball player before returning to playing basketball in the NBA. Lately, however, there is a new trend among boomerang employees. Some are returning to their previous employers, but not from another company. Instead, they are actually coming out of retirement. This movement has become popular to the point that companies are implementing formal programs aimed at rehiring retirees. Some see the rehiring as crucial, especially given how Baby Boomers are retiring at an exceedingly faster rate (current estimates show 10,000 file for retirement benefits per day) and the much discussed labor shortage that some industries are currently experiencing.
These boomerang programs are expected to grow, especially among larger companies with the resources to implement this type of program and take on the associated costs. In fact, phased retirement for federal government employees has been rolled out over the last few years. Such a program allows employees considering retirement to instead reduce their hours over time while still receiving retirement benefits as active employees.
For the most part, retirees are rehired to work less than 1,000 hours per year, which reduces some of the associated retirement plan costs. But if an organization has this type of program, or is looking to implement one, it is worth taking the necessary time to review retirement plan documentation as well other benefits policies regarding rehires. Some things to consider when reviewing the retirement plan are:
• Does a company’s plan exclude any types of employees?
• How does the plan define eligibility for employee and employer contributions (or eligibility for benefit accruals in a defined benefit plan)? (Read carefully—it’s very likely rehired employees will be immediately eligible for employee contributions, at a minimum, and that should be properly communicated.)
• Make sure to have resources in place, internally or through the plan’s third-party administrator (TPA), to answer questions and confirm operational compliance.
• Review the plan’s withdrawal options—are they flexible?
• Is a procedure in place to ensure that employees terminating employment in order to start retirement distributions have a bona fide break in service (as opposed to a brief, sham retirement before starting distributions and returning to work)?
• Lastly, consult with your ERISA counsel for clarification if there are any concerns or questions regarding Internal Revenue Service (IRS) rules and other legislation.
When reviewing the health insurance repercussions for the boomerang employee, the most important thing to consider is how many hours this employee will be working during the year. As an employer, if the rehired employee(s) are only scheduled to work 1,000 for the year (20 hours per week), as seems to be the trend, there is no requirement to offer these rehired retirees health insurance. The Patient Protection and Affordable Care Act has strict rules on how rehires and new hires are classified and clearly defines full-time employees as those who work 30 hours per week.
However, the health plan specs should be reviewed carefully for items such as break in service rules, etc. The employer may wish to consider providing boomerang employees designated health insurance and retirement plan call center or HR resources to tackle these sometimes complex rules.
Taking a step back and looking at the big picture, there are many benefits to such a program. It can be great for organizational culture. “Retiree employees” know the ins and outs of a company and can continue to operate in familiar job functions or can step up to a mentor role; often they are happy to be working and create positive morale. There are also the benefits to the employer: not having to extensively train new hires; being able to implement flexible scheduling such as on an on-call, contract, or project basis; the ability to access years of historical data and information through individuals; and even using a potential retiree rehire program for retention purposes.
Overall, this is an interesting development in the human resources realm and serves as some food for thought.