Retirees returning to work? Watch out for this trap

A growing number of companies are turning to an unusual source for help: retired workers. But this practice can cause more trouble than it’s worth if employers aren’t careful.

The benefits of bringing back retired workers are many — they already have a proven track record, don’t need to be trained, etc.

But simply bringing retirees back as full-time employees often can cause tax and legal complications, so employers normally take a different approach.

Most companies opt to place retired workers in the same job, performing the same or very similar job duties and simply classify them as independent contractors (IC).

Here’s the problem with that approach: A number of federal agencies — including IRS and DOL — have computer programs in place that automatically flag recently retired individuals who come back to work at their former company under the IC classification.

Even if the retiree-turned-IC is working fewer hours than before retirement, there’s a good chance that he or she has been misclassified.

To be absolutely certain your firm is in compliance, you may want to use a third-party provider when it comes to bringing back retired workers. Reason: The provider takes on the employer relationship with the retiree who is doing the work for you. This protects your firm from any compliance issues.

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