When rehiring helps a pension

Your Money

March 04, 2007|By Janet Kidd Stewart

Companies are recruiting former workers back into the fold, another reason to think about your retirement benefits as you walk out, or back in, the door.

Kirsten DaSilva, 35, spent the first eight years of her career as an auditor with accounting giant PricewaterhouseCoopers in Florham Park, N.J.

She jumped ship for an opportunity to join a company that was going public, but the company later was acquired, and DaSilva wasn't happy in the new regime.

So, last fall she went job hunting, on familiar turf.

She found a director-level accounting research position at her former PricewaterhouseCoopers office that offered more work-and-family flexibility than either of her previous jobs.

Once taboo, the hiring of these "boomerang workers" has gained acceptance from both employers, who save recruiting costs, and employees, who feel at home quickly and get up to speed faster.

"Boomerangs, on average, are 40 percent to 50 percent more productive in the early stages of a job than brand-new employees," said Diane Pardee, chief marketing officer for SelectMinds, a New York firm that helps companies establish social-networking programs.

But these workers face myriad, complex rules governing retirement money they left at their old firms. Experts said it pays to think through your options before you leave your old job, particularly if you think there's any chance you might want to return someday.

Financial institutions and the accounting industry seem to be leading the alumni drive.

At Ernst & Young, for example, workers who leave for less than a year receive credit in their retirement-plan vesting schedule for the time they were working elsewhere.

For example, an employee who leaves after less than four years of service (which qualifies for a 25 percent company match), then returns after a five-month absence, would come back into the retirement plan at a 50 percent match, the rate for workers with at least four years of service, a spokeswoman said.

This credit applies only to former Ernst & Young employees who return within one year, but all returning workers receive vesting credit for the time they spent at the firm the first time around.

When she returned to PricewaterhouseCoopers, DaSilva was fully vested in the company's pension and 401(k) plans, the same as when she left. Even if she hadn't been vested, DaSilva would have received credit for her previous service under company policy, officials said.

"I came back because of the culture, but I think the retirement-plan issues do weigh heavily for a lot of people," she said. "Once I was back here, I realized how important [the retirement package] can be."

But do you know how your own company handles retirement plans for returning workers?

By law, if you leave a company after vesting in the retirement plan, you automatically come back in vested, said Valerie Kupferschmidt, a consultant with Hewitt Associates in Lincolnshire, Ill.

If you left before fully vesting in the plan, the amount of time you were gone and whether or not you rolled your money out of the plan can make a difference in the retirement-plan situation to which you'll return, she said.

Check your firm's summary plan description to find out how the plan deals with returning employees, because the treatment must be the same for all workers.

And make sure you have the most current summary plan description, as the recent Pension Protection Act made changes to vesting schedules that could affect your situation, said Robert Walter, a principal with Buck Consultants.

Depending on the type of vesting plan your company has, you may be able to retrieve company matching funds that you forfeited when you left the first time, Walter said.

There may be far better reasons to roll your retirement plan into an individual retirement account or a new employer's plan when you leave a job. But with more workers ending up back where they started, it pays to know your options.

Have a retirement question? Write to yourmoney@tribune.com, or via mail at Your Money, Chicago Tribune, Room 400, 435 N. Michigan Ave., Chicago, IL 60611. If your letter is selected we may include you and your question in a future column.

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