PSERS. Return to Service Guidelines and Clarifications

Transcription

1 PSERS Return to Service Guidelines and Clarifications Publication # /2013

2 Table of Contents General Questions About PSERS Retirees Returning to Public School Employment...1 Employment Due to Employment Emergency or Personnel Shortage...2 Guidelines for Determining an Employment Emergency or Personnel Shortage...4 Information Required From Employers Regarding an Employment Emergency or Personnel Shortage...5 Employment in an Extracurricular Position...6 Returning to Employment in a Community College or Public University...7 Returning to Employment as an Independent Contractor...8 Returning to Employment at a Pennsylvania Charter School...9 Rules Regarding Returning to Employment for Members that Elected Multiple Service...10 Frozen Annuity...11 Elimination of the Frozen Annuity...11

3 Employers and members often seek clarifi cation regarding the eligibility for a public school retiree to be employed by a public school entity (including charter schools), community college or public university. Following is some general information that addresses the limited allowance of PSERS retirees to return to Pennsylvania public school employment without loss of their monthly retirement benefi t. The Retirement Code specifi cally defi nes the ability of a PSERS retiree to be employed by a Pennsylvania public school in emergency, shortage of personnel and extracurricular situations. 24 Pa.C.S. 8346(b), (b.1). General Questions About PSERS Retirees Returning to Public School Employment Q: Is it possible for a retiree to return to Pennsylvania public school employment and continue to receive their PSERS monthly retirement benefi t? A: No. The Retirement Code states that a retiree may not be employed by a Pennsylvania public school and receive a public school retirement benefi t at the same time. The Retirement Code, however, does provide that a retiree, who has a bona fi de break in service, may return to work for a Pennsylvania public school and continue to receive retirement benefi ts if one of the following exceptions applies: 1. Employment due to an emergency which increases the workload and creates a serious impairment of service to the public (hereafter referred to as Employment Emergency), or 2. Employment in the event of a shortage of appropriate subject certifi ed teachers or other personnel (hereinafter referred to as Personnel Shortage), or 3. Employment in an extracurricular position (Extracurricular Position)under a separate contract NOTE: Non-multiple service retirees who return to a community college or public university and elect membership in SERS, TIAA-CREF, or another approved retirement plan, may continue to receive their PSERS monthly retirement benefi t. Additional information on returning to a community college and public university can be found below in the Returning to Employment in a Community College or Public University section. Q: If a retiree returns to Pennsylvania public school employment under any of the above exceptions: 1. Is service credit earned and added to the individual s retirement account? A: No. A retiree returning under any of these exceptions may not earn any service credit. 2. Are retirement contributions deducted from the retiree s salary/wages and added to that individual s retirement account? A: No. Retirement contributions may not be deducted. 3. Can credit for this service be purchased with PSERS at a later date? A: No. Credit for the service may not be purchased at any time. 4. Can a retiree who has returned under any of these exceptions purchase credit for service previously rendered? A: No. Only active contributing members of PSERS can purchase service credit. 1

4 Employment Due to Employment Emergency or Personnel Shortage Whenever a school employer determines that it must employ a retiree due to an emergency which increases the workload and creates a serious impairment of service to the public (Employment Emergency), or a shortage of appropriate subject certifi ed teachers or other personnel (Personnel Shortage), a retiree may return to Pennsylvania public school service for a period not to extend beyond the school year during which the emergency or shortage occurs. 24 Pa.C.S. 8346(b). Q: Who makes the determination that a retiree s Pennsylvania public school employment qualifi es under the Employment Emergency or Personnel Shortage provisions? A: Initially, the school employer makes the determination that an Employment Emergency or Personnel Shortage exists and that only a retiree is available to fi ll the position. PSERS has the right to review the employment of any retiree for compliance with the intent of the Retirement Code. If the school employer or retiree have any questions as to whether a particular situation will qualify as an allowable Employment Emergency or Personnel Shortage, they may submit to PSERS for review the facts surrounding their determination. PSERS will advise the employer and retiree whether the employment of the retiree complies with the Retirement Code. PSERS will use the Guidelines for Determining an Employment Emergency or Personnel Shortage, shown below, in making its determination whether the employment of a retiree complies with the Retirement Code. Employers should be prepared to submit the Information Required From Employers to Determine an Employment Emergency or Personnel Shortage to enable PSERS to make its determination. Q: Must an employer make a good faith effort to hire non-retired persons to resolve an Employment Emergency or Personnel Shortage before hiring retirees? A: Yes. PSERS expects the employer to make a bona fi de effort to fi ll a position with a nonretired individual before employing a retiree. Upon PSERS request, the employer will be required to provide documentation to PSERS to support the need to employ a retiree in an emergency or shortage position. Q: Must there be a bona fi de break in service in connection with an Employment Emergency or Personnel Shortage? If so, how is that determined? A: Yes. There must be a bona fi de break in service. If there is a 90-day break in service between termination and re-employment, PSERS will presume there is a bona fi de break in service unless PSERS obtains information that there is a pre-arranged termination and re-employment. The guidelines for determining what constitutes a bona fi de break in service are set forth in the following section on Guidelines for Determining an Employment Emergency or Personnel Shortage. Q: What happens if PSERS determines that a retiree s Pennsylvania public school employment does not meet the Employment Emergency or Personnel Shortage provisions? A: The retiree s monthly retirement benefi t payments will be suspended. The retiree must also repay any retirement benefi ts received after the return to service date, regardless of the amount of time for which the retiree returned. If the retiree returned in a qualifying position, then the retiree will again become an active contributing member of PSERS. 2

5 Q: Does PSERS restrict the specifi c number of days the retiree may be employed by a Pennsylvania public school within a school year? A: No. If the employer has an Employment Emergency or Personnel Shortage, the retiree may work throughout the school year, provided the emergency or shortage remains in effect and the employer is unable to fi ll the position with a non-retiree. Q: If a retiree returns to Pennsylvania public school employment due to an Employment Emergency or Personnel Shortage during one school year, may the retiree continue employment into the next school year? A: No. A retiree may return to service under an Employment Emergency or Personnel Shortage only for the length of the emergency or shortage, not to exceed the school year in which the emergency or shortage occurred. Any continuation of employment during the next school year would require a new justifi cation of an Employment Emergency or Personnel Shortage and an explanation of why it could not be fi lled by a non-retired person. Q: What is the defi nition of school year? A: A school year is July 1 through June 30. Q: May a retiree be employed by Pennsylvania public schools in multiple Employment Emergency or Personnel Shortage situations within the same school year? A: Yes, provided in each instance the employer has fi rst made a bona fi de effort to hire nonretired individuals. 3

6 Guidelines for Determining an Employment Emergency or Personnel Shortage Retirees and employers can use the following guidelines to determine if there has been a bona fi de break in service and an emergency which increases the workload and creates a serious impairment of service to the public, or a shortage of appropriate subject certifi ed teachers or other personnel. A. If the retiree s return to service is at or soon after (i.e. less than 90 days) the date of termination or retirement, PSERS will presume that there has been no bona fi de break in service and that the return to service is a continuation of the prior employment. B. If there is a 90 day break in service between termination and re-employment, PSERS will presume there is a bona fi de break in service unless PSERS obtains information that there is a pre-arranged termination and re-employment. C. If there is a termination during a contract period that is not authorized by the terms of the contract, and the retiree returns to service during the period of the original contract, PSERS will regard the retirement and return to service as a breach of the original employment agreement, or as part of an oral or written severance agreement and not a bona fi de break in service. D. In determining whether the employer has established a shortage of subject certifi ed or other personnel, PSERS will consider whether the qualifi cations are too narrowly drawn so as to limit the candidates to retirees only, e.g., a math teacher with 30 years experience within commuting distance to employer. E. In the case of any retiree returning because of an Employment Emergency or Personnel Shortage, PSERS will take into account whether the school employer has considered requesting the PDE to issue an exceptional case permit to address the staffi ng problem due to the lack of a qualifi ed applicant. 22 Pa. Code (relating to exceptional case permits : PDE may approve the issuance of an exceptional case permit to a person at the request of a public school entity upon receiving evidence of exceptional conditions requiring Department resolution of the staffi ng problem. ) Under this regulation, a person who does not have all the qualifi cations for the position, but whom the school employer believes can fi ll the position on an emergency basis, may receive an emergency permit that will remain in place through the end of the school year (including summer school) which follows the date of issuance. 22 Pa. Code F. If a retiree returns to service with a different school employer PSERS will presume that there is a break in service unless the facts show there is pre-arranged employment with the new employer. The new employer can only offer an emergency position that does not extend beyond the current school year. Any continuation must be justifi ed each year. 4

7 Information Required From Employers Regarding an Employment Emergency or Personnel Shortage To determine if there is an Employment Emergency or Personnel Shortage, the employer will be asked to provide the following: 1. When and how the employee fi rst notifi ed the employer that he or she intended to terminate service and receive a retirement benefi t. Provide any documentation of the date of notifi cation, e.g., a resignation letter, internal memo, board minute documenting the notice, etc. Specifi cally, provide how long the notice of termination/ retirement was given before the actual termination/retirement date. 2. Copies of the fi rst and any subsequent formal notice of the termination/retirement. 3. Copies and explanations of all relevant employment contracts and severance agreements (both oral and written). 4. An explanation of all steps taken by the employer to fi nd a non-retiree replacement and the dates of each step in the process. 5. Documentation for each step in the process, including copies of all advertisements placed in any media (e.g., newspapers, trade papers, web posting, s, direct correspondence, etc.), copy of employment consultant or other agreement to perform a search for a non-retiree replacement. Include chronological documentation of these events such as when did these steps begin and when did they terminate. 6. A written listing of the candidates considered for the position and the reason(s) why each did not meet the written requirements for the position. 7. Information pertaining to who made the hiring decision. 8. Documentation of when the employer made the decision to hire the member. 9. If the date of the return to service is before or shortly after the date of termination or retirement, provide justifi cation for the Employment Emergency or Personnel Shortage, accompanied by an explanation of why the retiree could not have simply remained in service thus avoiding the Employment Emergency or Personnel Shortage. 10. A written description of the means by which the retiree indicated his or her interest and became a candidate for the position. Include in the description facts such as whether the retiree responded to a posting for the vacant position, or did the employer fi rst contact the retiree regarding the vacancy. 5

8 6 Employment in an Extracurricular Position To meet the Extracurricular Position exception, a retiree must be employed under separate contract by a Pennsylvania public school in an extracurricular position, and their duties must be performed primarily outside regular instructional hours and not as part of the mandated educational curriculum. This type of employment is permitted in all public school entities, including community colleges and public universities. The Retirement Code specifi cally allows for extracurricular administrative positions and positions that do not work directly with students (for example an athletic director is eligible for the extracurricular designation). 24 Pa.C.S. 8346(b.1). Q: Is there a requirement that an Employment Emergency or Personnel Shortage exist when a retiree returns to Pennsylvania public school employment in an extracurricular position? A: No. Employment of retirees in an extracurricular position does not require either an Employment Emergency or Personnel Shortage. Q: Is there a time limit when a retiree returns to Pennsylvania public school employment in an extracurricular position? A: No. There is no time limit. Q: Is a written contract for the extracurricular position required? A: Yes. The written contract with the employer must also include a waiver of any potential retirement benefi ts from the extracurricular employment. Q: What would be an example of acceptable waiver language in a contract providing employment to a retiree in an extracurricular position? A: Sample contract language that will satisfy the extracurricular requirements: By entering into this contract, Retiree agrees that neither the Retiree, nor the public school employer, shall make any contributions to the Public School Employees Retirement System (PSERS) on account of any service performed under this contract. Retiree further agrees to waive all retirement benefi ts (including, but not limited to, benefi ts from a Multiple Service election) from PSERS that could arise from service performed under this contract, and shall release and hold harmless both the public school employer and PSERS from any liability for the payment of retirement benefi ts that could arise from service performed under this contract. Q: Must a copy of the employment contract be submitted to PSERS for its review? A: No. The contract is between the employer and the retiree, but PSERS has the right to review the contract should there be any question about the retiree s extracurricular employment. If the employer or retiree has any questions about the retiree s extracurricular employment, they may submit the contract and the circumstances surrounding the contract to PSERS for its review. PSERS will advise whether the employment of the retiree complies with the intent of the Retirement Code. Q: What does it mean that the extracurricular employment must be performed primarily outside regular instructional hours? A: PSERS interprets primarily to mean that more than half of the extracurricular employment hours must be performed outside the school s regularly scheduled class hours.

9 Q: Does extracurricular apply to only athletic positions? A: The Retirement Code defi nes extracurricular position as: a contract position fi lled by an annuitant that is separate from the established academic course structure, including the position of athletic director. This defi nition is broad enough to allow a custodian, bus driver, or other non-teaching position to qualify under this exception. Returning to Employment in a Community College or Public University There are additional rules that may permit a school retiree to return to service to any of the state s community colleges, Penn State University, or 14 state-owned universities without a suspension of retirement benefi ts. The following information should be used to determine the impact of returning to service with any of these entities. A. Approved post-retirement employment with one of these employers is generally based on the member s eligibility to elect an alternate retirement plan. Generally, a college or public university employee may select a retirement plan from among three choices: 1. PSERS 2. SERS (State Employees Retirement System) 3. TIAA-CREF or other approved retirement plans B. PSERS benefi ts are suspended if the retiree is not eligible to select SERS, TIAA- CREF or other approved retirement plan because they do not work enough hours or days to meet the minimum membership requirements for these plans. To determine the minimum membership requirements for other retirement plans, retirees should contact that plan or their proposed employer. C. For a retiree to elect an alternate retirement plan, a bona fi de break in service is required from all employers. This means there can be no pre-arrangement for employment with the college prior to retirement. A signed employment contract or letter of intent to return would constitute a pre-arrangement. PSERS reserves the right to contact the college or public university for evidence of a pre-arrangement. D. Emergency employment at a college or public university is not common, as there are generally many qualifi ed people to fi ll the vacancy. The college or public university can simply choose not to offer the course that semester. Generally, the same emergency rules apply with regards to recruitment efforts, length and nature of emergency. E. A retiree may also be employed in an extracurricular capacity for a college or public university. The employment is not bound by normal instructional hours, because colleges offer for-credit courses during both day and evening hours. F. Extracurricular employment cannot involve instruction of mandated curriculum. Examples of approved extracurricular employment with a college or public university would include tutoring, coaching, and non-credit course instruction. 7

10 Special rules apply for a multiple service retiree that returns to work in a college. See the section titled Rules Regarding Returning to Employment for Members that Elected Multiple Service for more information. If you think you may want to work for a public school (especially a college or public university) after retiring, contact PSERS to discuss how your employment could affect your PSERS benefi ts. Returning to Employment as an Independent Contractor If a member terminates employment and returns to service shortly thereafter as an independent contractor, or as an employee of an independent entity, with essentially the same job duties as before, PSERS may view the new employment to be a continuation of the prior employment rather than an Employment Emergency or Personnel Shortage. An exception will be considered if the service is provided on a temporary basis through a legitimate third-party entity such as an established temporary staffi ng organization or if the person is working in a position that was an employment position but has been legally reclassifi ed as an independent contractor position (for example, if bus drivers for a school district are outsourced, and the company that is now handling bus transportation hires the individuals previously employed by the school district). Q: What are some examples of aspects that would allow a member to be considered an independent contractor? A: Some aspects that could be considered include: If a member is doing different work than they did while active Is paid under a form 1099 with a separate written contract Receives no fringe benefi ts Sets his/her own hours Does not receive a performance evaluation by the district or school Supplies his/her own materials Has an offi ce outside the school grounds Has the ability to perform the same service for other schools Q: What if a school district decides to outsource its bus service so it terminates the current bus drivers and some are picked up as new employees of the independent company that was awarded the bus contract. What would be the impact on the retired bus drivers who are collecting a pension from PSERS and now work for this new company? A: The bus drivers would be eligible to work for this independent company without it impacting the retirement benefi ts they are receiving from PSERS. There are no absolutes or defi nite situations that are always approved or not approved when it comes to post-retirement employment as a consultant or independent contractor. We recommend that members submit their specifi c requests in writing and mail them to the PSERS Headquarters, 5 N 5th Street Harrisburg PA , so we may review the details of the arrangement and offer a formal determination. These requests must be reviewed on a case by case basis, and PSERS must take all the factors into consideration before rendering a determination. 8

11 Returning to Employment at a Pennsylvania Charter School There are additional rules that may permit a school retiree to return to service in a state approved charter school without the suspension of retirement benefi ts. The availability is limited and based upon the enrollment of the member in a retirement plan. The Charter School Law (CSL) provides fl exibility to the charter schools with regard to the selection of retirement plans applicable to its employees. Under the CSL, employees of a charter school must be enrolled in PSERS unless the employer provides an alternate plan that covers the employees. The charter schools may also offer membership in PSERS to some of their employees and provide an alternate plan to other employees. The CSL is clear that, if a charter school offers an alternate plan to any of its employees, then those employees will not be able to obtain concurrent service credit in PSERS. Q: Can a PSERS annuitant return to service with a charter school, in a non-emergency capacity, without having the PSERS pension suspended? A: Yes, if the annuitant joins an alternate plan. If enrolled in an alternate plan, then the return to service provision of the Retirement Code does not apply. This is similar to an annuitant returning to a community college and electing TIAA-CREF without impacting the annuitant s pension. Q: If a PSERS annuitant returns to service with a charter school, in a non-emergency capacity, and does not elect an alternate plan, is the PSERS pension suspended? A: Yes. If the annuitant is not enrolled in an alternate plan, then the return to service provision of the Retirement Code applies, and the annuitant s pension will be suspended. The suspension applies regardless of whether the charter school is participating or nonparticipating in PSERS. Q: Can an annuitant return to a charter school in an Extracurricular Position or Employment Emergency without impacting the annuity? A: Yes. The same rules apply to charter schools that apply to regular public schools. 9

12 Rules Regarding Returning to Employment for Members that Elected Multiple Service A multiple service member may also be employed in an Employment Emergency or Personnel Shortage after retirement, although the rules governing their post-retirement employment differ depending on the employer. If a multiple service member is employed after retirement in an Employment Emergency or Personnel Shortage by a public school district, charter school, intermediate unit, or any employer that offers only PSERS as a retirement plan, they must follow PSERS rules for emergency employment. These rules have been explained in detail above. If a multiple service member is employed in an Employment Emergency or Personnel Shortage by a state-owned university, community college, Penn State University, or any employer that offers the State Employees Retirement System (SERS) as a retirement plan, SERS rules for emergency employment are in effect. Your employer must request emergency employment through SERS, and you should contact your SERS retirement counselor for clarifi cation of the SERS emergency rules. Q: May a multiple service member who retires from PSERS and returns to service in a state agency continue to receive a monthly retirement benefi t? A: Yes, provided the retiree meets the Employment Emergency or Personnel Shortage requirements under the SERS Code, including a limitation of 95 days. Q: What would happen if a multiple service member who retires from PSERS returns to service in a college and it is not deemed to be an Employment Emergency or Personnel Shortage? A: A multiple service retiree who returns to work in a college will be automatically enrolled in SERS and PSERS benefi ts will be suspended. Q: If a member never elected multiple service and retired from PSERS, may they work for an employer that offers SERS as a retirement option such as the Department of Agriculture? A: Yes, as long as the member does not elect multiple service. If the member elects multiple service, the retirement benefi t provided by PSERS will be stopped and the member will be considered to have returned to active service. 10

13 Frozen Annuity If you decide to become an active member again, that is, you return to service in a Pennsylvania public school but the exceptions to return to service do not apply to you, the value of your annuity will be frozen by PSERS. To have the value of your annuity frozen means: 1. Your monthly retirement benefi ts stop until the day you retire again. 2. You again start making contributions to your PSERS account and earning service credits for the length of this employment period. These rules also apply if you are a multiple service retiree and begin employment covered by SERS. At the time of your next retirement, we will calculate your new retirement benefi t using both periods of your employment. Each period is calculated separately. First, PSERS calculates an annual retirement benefi t based only on the salaries you received and the service you rendered since your return to school employment. Next, we add the annual retirement benefi t from your fi rst retirement (the frozen portion), to the annual retirement benefi t from your second period of employment. The sum of the two annual retirement benefi ts becomes your new annual retirement benefi t. Elimination of the Frozen Annuity If you return to Pennsylvania public school service and earn three or more years of additional credited service, you become eligible for an alternate way of calculating your annual retirement benefi t known as the elimination method. This method eliminates the negative effects of the frozen annuity but requires that you repay or accept a debt against your account equaling all benefi ts paid to you during your previous retirement plus interest. The elimination method combines the years of service from your previous employment with your new period of employment. Advantages of using the elimination method include: Converting Class T-C school service to Class T-D service. Using all periods of employment to calculate your fi nal average salary (FAS). Reducing or eliminating early retirement penalties applied at your fi rst retirement. Even though you must repay your frozen annuity debt, the elimination method usually results in a higher annual retirement benefi t. If the elimination method does not result in a higher annual retirement benefi t, PSERS will calculate your second retirement as a frozen annuity. 11

14 The debt can be paid by: Making a lump-sum payment. Making installment payments through your school employer. Having a permanent adjustment applied to your monthly benefi t at the time of your next retirement. Using rollover money as payment towards the debt. Some combination of the above. The unpaid debt accrues interest until your next retirement. The rate of interest is reviewed on an annual basis by the PSERS Board of Trustees. Any unpaid balance will be paid as a permanent reduction applied to your monthly benefi t at the time of your next retirement. If you opt for a permanent reduction, PSERS recovers the debt based on the amount owed and an annuity factor based on your life expectancy. If you choose to make payments on the debt, PSERS allocates the money received as follows: Member account - This is an amount equal to your contributions and interest. You can withdraw this amount at your next retirement. State account - This account includes both the Commonwealth of Pennsylvania and the school employer contributions. You cannot withdraw this money at your next retirement. If you make any payments on your debt and your retirement benefi t is calculated as a frozen annuity, PSERS will reimburse the payments to you. If you are considering a return to Pennsylvania public school service and wish to know the potential impact this will have on your current benefi t, contact your nearest PSERS Regional Offi ce to obtain information on how to request a Retirement Estimate. During this conversation your counselor will ask: 1. When do you plan to return to public school service? 2. When will you retire again? 3. What will your new Final Average Salary be? 12

15 The information contained in this publication is strictly meant to serve as a general aid to answering many of the typical circumstances or questions that may arise from a member considering a return to service. It is not intended to serve as the final answer. It is recognized that all circumstances are unique. When in doubt a member or employer should contact PSERS for additional clarification.

16 Public School Employees Retirement System 5 N 5th Street Harrisburg PA