It is inappropriate to engage in a pre-arranged strategy to collect retirement benefits while still employed. This is a violation of the Fund's rules as well as federal tax law.

YMCA Retirement Plan document:
Section 5.1 "A Participant's eligibility to receive benefits under the Retirement Plan...must be the first day of a month subsequent to the cessation of Compensation and the severance from YMCA employment."

Section 6.3 "In no event shall any Participant who is employed by a Participating YMCA have the right to a withdrawal of his/her Accumulated Basic Participant Contributions or his/her YMCA Account Balance."

Internal Revenue Code & Regulations for basic plan contributions:
IRC Regulations, Section 1.401-1(b)(1)(i) "A pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement."

IRS Rev. Rul. 74-254 "Revenue Ruling 56-693, as modified by Rev. Rul. 60-323, holds that a pension plan fails to meet the requirements for qualification under section 401(a) of the Code if it permits employees to withdraw prior to normal retirement any part of the funds accumulated on their behalf, which consist of employer contributions or increments thereon prior to the severance of employment or the termination of the plan. Therefore, a pension plan does not qualify if it permits distributions prior to normal retirement and prior to termination of employment or termination of the plan."
 

There are certain legitimate situations where an individual may become reemployed by a YMCA after beginning his or her Retirement Fund annuity. In order to avoid potential problems, it is recommended that you discuss specific situations with your legal counsel and secure a written legal opinion prior to taking any action.

Here are two examples of acceptable situations:

1. Jerry retired as a Branch Executive Director and began collecting his retirement benefit. Negotiations with his replacement fell through, and subsequently the Board asked him to return as the Branch Executive in an interim capacity while a new search is undertaken.
2. Mary retired as Secretary of the Membership Department and began collecting her retirement benefit. After gardening and fixing up her home for six months, she became bored, applied for and was accepted for a part-time position in the development office at another YMCA.

Here are two examples of unacceptable situations:

1. A very difficult personal situation necessitated that Brad find a way to add to his household income. Accordingly, he arranged with his supervisor that he would retire, begin collecting his retirement benefit then be rehired to his existing job.
2. Suzanne was all set to retire as the CEO, but the Board had not yet found her replacement. The Board asked her to stay on for three extra months while they extended their search. She agreed, with the understanding that she would continue earning her salary and also start her retirement annuity.

 

As noted, federal tax law and regulations provide that an employee must terminate employment prior to an employer plan beginning pension distributions. If the employee has not actually (and completely) terminated their employment, the plan will not be a tax-qualified pension plan. In the multiple-employer plan context in which the YMCA Retirement Plan operates, this could mean that the participating YMCA that violated this rule would be terminated from participation in the Plan, and the account balances of employees at that YMCA would become fully taxable to them at that time.
 

While the YMCA Retirement Fund cannot offer legal advice, we strongly recommend that a substantial period of time is needed between an employee's termination date and their rehire date, in order to establish that there was a complete separation from employment and that no pre-arrangement for rehiring was made. We also recommend that a YMCA undertake a full and fair search for a replacement when filling any vacancy. Of course, no amount of time or public search can completely mask an illegal pre-arranged retire/rehire strategy. In order to assure compliance with the letter and spirit of the law, it is recommended that a written legal opinion be secured prior to taking any action.
 

Although the decision to hire any employee is the specific prerogative of the employing YMCA, the Fund wants YMCAs and staff to be fully aware of the law. It is the responsibility of Fund management to operate the Plan in conformance with all applicable benefit laws and regulations to protect the benefits for all Plan participants.
 

Baby boomers are aging, and demographics seem to indicate that not enough skilled workers will be available in the future. Phased retirement is a concept that would allow older employees to cut back on their hours and pay from their employers, and begin collecting part of their pension benefits without completely retiring. (This is not currently allowed under federal pension law). The concept of phased retirement has been on the radar screen of professionals in the industry, government regulators and the Congress for several years, and the subject is actively under consideration by Congress. The Fund will monitor pertinent developments, and, in the event that changes in federal regulations occur, we will modify our Plan.