Working After Retirement (WAR)

Who? What? When? Where? Why?

How Much?

• Definitions

• Termination Regulation

• PEERS Retirees WAR Limits

• PSRS Retirees WAR Limits

• “Critical Shortage” Retiree Employment

• “Employee” vs. “Independent Contractor”

• Final Thoughts

• Questions

Agenda

• Employee

– Someone who meets the IRS definition of an employee

• Independent Contractor

– Someone who meets the IRS definition of an independent contractor

• www.irs.gov

• (800) 829-1040

• Volunteer

– An unpaid employee of the employer

Definitions

• Full-Time Employment

– PSRS

• Same number of hours that a full-time classroom teacher works in that district

– PEERS

• Determined by the employer, although we assume a similar level of employment as PSRS full-time

• Part-Time Employment

– Less than full-time

• Temporary Substitute Employment

– An individual filling a position that is temporarily vacant

Definitions

• Retiree

– Someone receiving monthly benefit payments from PSRS or PEERS based on their own service

• Covered Employer

– Any employer actively participating in PSRS and/or PEERS

• Eligible Employment

– Employment that would normally be covered by PSRS or PEERS if the individual were not retired

Definitions

• School Year

– July 1 through June 30 each year

• Retiree Limits

– The post retirement employment limits are based on the system from which the individual retired, and has nothing to do with the individual’s position or certified status after retirement

• Retirement Incentive

– Any compensation for which the member must retire, terminate, agree to retire, or agree to terminate, to receive

• Health Insurance…

Definitions

• Requires retiree to terminate ALL employment in any capacity for one month from the effective date of retirement

– Not necessarily the retiree’s last day of work…

• Applies to retirees of both PSRS and PEERS

– If the member does not terminate, the member is not eligible to retire

Termination

• Prohibits retiree from executing a contract for employment after retirement prior to receiving first benefit payment

– Contracts that cannot be executed include:

• Retirement Incentives tied to work

• Insurance as a retiree, if tied to work

• Substitute or part-time employment

• Applies to retirees of both PSRS and PEERS

– If the member does not terminate, the member is not eligible to retire

Termination

• 16 CSR 10-5.010(2) – The earliest date on which service retirement may become effective is the first

day of the calendar month following the calendar month in which the services of the member are terminated, or the first day of the calendar month following the filing of the Application for Service Retirement, whichever is later; except that the earliest date on which service retirement may become effective for a member retiring after receiving credit for a year of membership service shall be July 1, the first day of the fiscal year following the termination of services. Termination from employment covered by the retirement system prior to the effective date of retirement is required to be eligible for a retirement benefit. A member shall not be deemed to have terminated employment if the member is employed in any capacity by an employer covered by the retirement system within one (1) month after his or her effective date of retirement. A member shall not be deemed to have terminated employment if, prior to receipt of his or her first benefit payment, the member executes a contract for employment in any capacity by an employer covered by the retirement system that commences on or after the execution of such contract. The member shall be required to repay any benefit payments paid if it is determined that the member did not terminate employment covered by the retirement system.

Termination

• Section 169.660 RSMo

• After retirement, PEERS retirees are limited to working no more than 550 hours in a school year, either part-time or as a temporary substitute, in any capacity, without a loss of monthly benefit – Both the retiree and the district are required to track hours and

comply with this limit!

• PEERS retirees are not subject to an earnings limit • It is our understanding that the retiree earnings are subject to Social

Security contributions

• PEERS Disability Retirees are subject to this limit after age 60 – Before age 60, different limits apply

PEERS WAR Limits

PEERS WAR Limits - Usage

School Year Retirees Wages Avg/Retiree

2011-2012 1,786 $5,823,007.27 $3,260.36

2010-2011 1,711 $7,155,906.98 $4,182.30

2009-2010 1,592 $6,877,061.55 $4,319.76

2008-2009 1,494 $6,628,332.48 $4,436.63

2007-2008 1,506 $6,370,786.21 $4,230.27

2006-2007 1,364 $5,269,853.95 $3,863.53

2005-2006 1,253 $4,887,458.06 $3,900.60

• Section 169.560 RSMo

• PSRS retirees are subject to the same 550 hour limit discussed for PEERS retirees

• PSRS retirees are also subject to an earnings limit

– A PSRS retiree may earn no more than 50% of what the retiree would earn if employed in that position full-time, for the full school year in that district • Based on position employed in as a retiree, not the position from which the

employee retired

• It is our understanding that the retiree earnings are subject to Social Security contributions

– Both the retiree and the district are required to track hours and earnings and comply with these limits!

PSRS WAR Limits

• Example 1

– A PSRS retiree is employed as a teacher for 3 hours a day for the school year. This teacher would earn $50,000, based on education and experience, as a full time teacher in this district.

– Annual Earnings Limit is $25,000

• ($50,000 x 50%)

PSRS WAR Limits

• Example 2

– A PSRS retiree is employed as a teacher for 3 hours a day for the school year. This teacher would earn $50,000, based on education and experience, as a full time teacher in this district, and the employer is going to pay $2,000 towards the retiree’s health insurance premium.

– Annual Earnings Limit is $26,000

• (($50,000 + $2,000) x 50%)

– Remember, the $2,000 paid for insurance premiums counts towards the $26,000 earnings limit. That leaves $24,000 in “salary” that the retiree can earn

PSRS WAR Limits

• Example 3

– A PSRS retiree is employed as a bus driver for 3 hours a day for the school year. This retiree would earn $15 per hour based on education and experience, as a full time bus driver in this district.

• Full time in this district – 7 hours per day, 184 days

– Annual Earnings Limit is $9,660

• (7 hours/day x 184 days x $15/hour) = $19,320

• $19,320 x 50% = $9,660

PSRS WAR Limits

• Holiday/Sick/Annual Pay/Hours – If a retiree is paid for a holiday, but does not work the holiday, the

pay counts towards the 50% earnings limit, but nothing towards the 550 hour limit because the retiree didn’t actually work any hours

• Incentive Pay/Hours – Any hours worked that are required by an incentive agreement

count towards the 550 hour limit. – If the retiree is paid for the time worked, in addition to the incentive

payment, the pay for time worked counts towards the 50% earnings limit • Example

– A retiree receives a retirement incentive of medical insurance premiums paid for 3 years in exchange for subbing 20 days over that period of time. When the retiree subs, the retiree is paid the normal sub rate. The sub pay is counted towards the 50% earnings limit, but not the medical insurance premium

PSRS WAR Limits

• Can I volunteer at the same time as I work for pay?

– Maybe

• If the duties of your volunteer assignment are substantially different from your duties as a paid employee, then the volunteer hours do not count towards the WAR limits

• If the duties of your volunteer assignment are not substantially different from your duties as a paid employee, then the volunteer hours do count towards the WAR limits

Volunteering

PSRS WAR Limits - Usage

School Year Retirees Wages Avg/Retiree

2011-2012 9,136 $43,638,426.27 $4,776.54

2010-2011 8,889 $61,909,374.77 $6,964.72

2009-2010 8,280 $59,697,988.53 $7,209.90

2008-2009 8,140 $58,962,161.30 $7,243.51

2007-2008 7,700 $57,419,305.29 $7,457.05

2006-2007 7,274 $52,470,409.10 $7,213.42

2005-2006 6,688 $47,507,280.94 $7,103.36

• Anyone retiring in a month other than July will be subject to prorated limits for the first school year in which they retire

– Example

• A PSRS member retiring effective January 1, 2012 is limited to:

– 275 hours, AND

– 25% of full time position earnings

• As of July 1, 2012, this PSRS member would be subject to the full WAR limits:

– 550 hours, AND

– 50% of full-time earnings

PSRS/PEERS WAR Limits - Prorated

• WAR Records provide the format necessary to track hours worked (retirees of both systems) and earnings (PSRS retirees only)

• Will be sent to both the employer and retiree when the retiree is first reported for the school year

– Records are required to be provided to PSRS/PEERS when requested

– Blank forms can be downloaded from our web site

WAR Records

• Section 169.596 RSMo

• An employer may hire retirees on a full-time basis to comprise up to 10% of their certificated/non-certificated staff (no more than 5)

• The retiree may be employed in such a manner for no more than 2 full-time school years

– Consecutive employment not required

• Employer contributions are due on all critical shortage retiree earnings

• It is our understanding that the retiree earnings are subject to Social Security contributions

Critical Shortage

• To qualify to hire retirees under this section, the employer must:

– Show a good faith effort to hire non-retirees

– Post the vacancy for at least one month

– Have not offered early retirement incentives for either of the previous two years

– Solicit applications locally and through teacher education programs

– Determine that an insufficient number of eligible applicants exists

– Declare a “critical shortage” that lasts for one year

Critical Shortage

• Compliance with individual 2 year limit is determined in the same manner in which we determine service credit

• The hiring superintendent is required to certify in writing, each school year, that the district has met all the statutory criteria to hire each specific retiree under the critical shortage statute

• PSRS retirees are limited to employment in positions for which DESE requires a valid certificate

• PEERS retirees are not limited in which positions they can be employed

• Superintendents are not eligible for employment under the “critical shortage” statute

Critical Shortage

• Can a retiree work as a “critical shortage” employee and a “550” employee at the same time?

– Maybe

• A retiree cannot work both as a “critical shortage” employee and a “550” employee at the same district; but

• A retiree can work as a “critical shortage” employee in one district and as a “550” employee at another district

Critical Shortage

PEERS Critical Shortage- Usage

School Year Retirees Wages Avg/Retiree

2011-2012 3 $22,879.97 $7,626.66

2010-2011 6 $73,656.29 $12,276.05

2009-2010 7 $132,330.59 $18,904.37

2008-2009 4 $141,180.48 $35,295.12

2007-2008 3 $16,840.70 $5,613.57

2006-2007 3 $55,809.32 $18,603.11

2005-2006 9 $177,332.58 $19,703.62

PSRS Critical Shortage- Usage

School Year Retirees Wages Avg/Retiree

2011-2012 48 $1,185,527.60 $24,698.49

2010-2011 57 $2,643,939.05 $46,384.90

2009-2010 104 $4,338,816.82 $41,719.39

2008-2009 136 $6,009,972.89 $44,190.98

2007-2008 114 $5,272,682.05 $46,251.60

2006-2007 109 $4,376,122.55 $40,147.91

2005-2006 103 $4,516,540.51 $43,849.91

• Any services provided as an “employee” do count towards the post-retirement employment limits of that system

• Any services provided as an “independent contractor” do not count towards the post-retirement employment limits of that system

• www.irs.gov

Employee vs. Independent Contractor

Questions?