An employer is in the practice of "firing" employees on a Friday, having them immediately fill out an application for a position within a different area of the company and then "rehiring" the fired employees to start in the new area/position the following Monday. For all practical purposes, what the employer is doing is transferring employees from one area of the company to another, but for whatever reason it treats these transfers as a fire and rehire. The employees continue participating in the employer's qualified plan to the extent that they were eligible prior to the rehire.
My question is whether this "fire and rehire" would consitute a severance from employment or separation from service that would permit the employee to take a distribution from the plan. Any input or direction on this issue would greatly appreciated.
Thanks.