I retired last year (early at 55), and was recently called back in to work at my old employer as a "rehired retiree" (hourly, part time for less than 1000 hours, no prior promise of employment, etc). I am not a contractor, but rather an hourly employee working for my prior company.
I am currently receiving 5 year lump sum pension payments, part of which I receive as taxable income, part rolled over into an IRA, and with my contributions being paid out over the term, rolled over into a Roth account. I also have a 401K account from my prior employment. I have not drawn any money from any of the tax advantaged accounts, because I can live off the taxable pension payments until they end in 5 years.
The taxable pension payments pushes anything I make at my rehire job into a very high tax bracket, and that income also excludes me from individual IRA/Roth contributions.
I would like to contribute to the company's 401k account to the maximum amount possible to shield as much of my income as possible from taxes ( I don't need this new income immediately), but they say I am ineligible to contribute to the 401k because I retired. Are they right? What rule or statute is this based on?
They offer the 401K to hourly part time employees with the same number of work hours who aren't returning retirees, so it doesn't seem right that I don't get that option also.