Proper Termination of Pre-Retirement Employment
IRS rules state that retirement systems must require a clear separation of service between the end of pre-retirement employment and the start of post-retirement work for covered employers. PSRS/PEERS requires a separation period of one month from the PSRS/PEERS retirement date (not necessarily the last day worked.)
In order for employment to be considered terminated and the member considered eligible to retire, he or she must:
- End all employment with all PSRS/PEERS-covered employers,
- Not return to work for a PSRS/PEERS-covered employer in any capacity for a period of one month after the PSRS/PEERS retirement date, including volunteer work if the retiree later becomes a paid employee with the same employer in the same, or a similar position, and
- Not be under contract for employment at a PSRS/PEERS-covered employer in any capacity until after receiving the first retirement benefit payment. A contract includes any type of early retirement incentive or separation agreement that requires the retiree to return to work or volunteer in any capacity after retirement in return for any type of compensation, including health insurance benefits.
Example
If Jane retires July 1, she can begin working August 1 for a PSRS/PEERS-covered employer in a part-time or temporary-substitute position up to the hourly limit (and earnings limit if she is a PSRS member), and continue receiving monthly retirement benefits. She cannot sign a contract for employment or work in any capacity (including teaching summer school, working under the “Critical Shortage” Full-Time Employment Exception, and possibly volunteering until August 1.
Members who violate these rules are not considered terminated and are not eligible to retire and receive benefits. Therefore, they are not eligible to work for covered employers as retirees. In addition, they are required to repay any benefits received while ineligible, including a Partial Lump Sum Option (PLSO) payment, and may be required to pay contributions on earnings until employment is properly terminated.