Can You Force Retirement? | Complete Payroll

Have you ever considered what you would do if you had an employee who refused to retire? Do you have the right to make them do it?

It’s a growing problem: retirement-eligible employees elect to stay at work, either because they have not saved enough to retire—the recession that started in 2008 affected countless people’s retirement savings, for example—or because their total rewards packages contain incentives to stay put, like great year-end bonuses or excellent medical insurance.

And this affects your younger employees who are expecting promotions. When people don’t advance through the ranks because older workers are staying put, they become frustrated. If your older employees choose to delay retirement, your younger employees may start seeking opportunities elsewhere, at companies where they’ll have the chance to advance.

This is not to say that older workers are not valuable. They certainly are, with their experience, productivity and work ethic. So your best bet is to find a balance in your workforce and in your bottom line. And if you can’t?

Be Aware of Age Discrimination Laws

Under the Age Discrimination in Employment Act (ADEA), workers over the age of 40 have certain rights. The ADEA states that it is unlawful for employers to discriminate against people based on their age, whether you’re talking about hiring, firing, promotion, demotion or training.

However, the ADEA cannot protect everyone. If you have a legitimate reason to fire an employee or that employee is no longer able to perform stated job duties, you can discharge them for breaking rules or for nonperformance. Contact your company's legal counsel for advice on your decision.

Financial Considerations

One of the few instances where you can force a person to retire includes situations where you have executives or high-level policy makers who are entitled to receive retirement benefits of at least $44,000 per year. And some state and local government employees may be forced to retire by a certain age.

If you want to avoid the potential for litigation, here are five steps you can take to help your older employees phase out of full-time employment:

1. Facilitate flexibility in scheduling to help them transition from full-time to part time responsibilities.
2. Make sure your retirement plan offers effective education offerings.
3. If not, offer assistance to help your employees’ financial transition to retirement by way of financial counseling, pre-retirement seminars or an annuity as a payout option.
4. Provide education about Social Security and Medicare benefits.
5. Promote the Saver’s Credit and catch-up contributions, two meaningful tax incentives.

Questions? Call Complete Payroll. We’d be glad to help you figure out what solution is best for your company.