Boomerang Employees
Times are good with the recent job report showing over 200,000 jobs added, higher wages and fewer people unemployed. So employers eager to fill jobs are more likely to hire employees that used to work for them. According to a recent survey by Accountemps, 98% of HR managers would rehire former employees that left on good terms. But companies need to be careful to follow ERISA rules and plan documents for boomerang employees.
- Carefully review plan documents to be sure that rehires are treated equally.
- Understand the various vesting and forfeiture rules when the former employee left and determine how to treat non-vested benefits.
- Be sure to use appropriate eligibility rules and whether these rehires should be able to join the plan immediately.
- Figure out how to calculate prior service credits.
No matter what you might want to offer these boomerang employees, you have to follow the rules under ERISA and the plan’s documents. Another consideration – if the auto-enrollment deferral rates are lower than the rate the boomerang employee was deferring before they left, you might consider asking if they want to defer at the higher rate.
And, with hiring getting tougher and wages going up, it’s even more important to have a competitive retirement plan which includes a company match. Many companies are moving to a stretch match. The most common match is 50% of the first 6% or 3% of compensation. Why not stretch the match to 25% of the first 12% signally the optimal deferral rate for most employees? And why not put it in terms they understand – dollar amounts rather than percentages.
