Scenario: An employee retires from full-time work at age 56 and then returns to work for the same employer as an "on-call" status (hourly pay, less than 20 hours per week, no leave time, no benefits). Can this person take distributions from a 403b account without the early-withdrawal penalty? This comes down to exactly what "separates from service" means. The employer in this case considers the employee to be a retiree in spite of the part-time employment. Is that enough for the IRS to define the employee as "separated from service"?