Many school districts are still looking to fill vacant positions before the school year begins. As a result, school districts may be considering hiring someone who previously retired from employment in the school district or in another school district. If the potential employee is receiving a Wisconsin Retirement System (WRS) annuity, the school district will need to understand the impact of the annuitant status on the employment relationship. This Legal Update will review the laws and regulations governing the hiring of a WRS annuitant.
If a school district intends to employ a WRS annuitant, it is necessary to determine when the employee terminated employment, if a proper break in service has occurred, and whether an employee is returning to work in WRS eligible employment. The timing of these events is extremely important. Depending upon the answers to these inquiries, upon rehire, the employee’s annuity may be suspended and the employee may be eligible to participate in the WRS or the employee may have the right to continue to receive the WRS annuity and avoid WRS participation, while working for the school district in a new capacity.
Valid Termination of Employment. A valid termination meets all of the following conditions:
- The employee stops working and earning compensable wages and other benefits as an employee.
- For a voluntary termination, the employee complies with the employer’s policies, including filing a letter of resignation.
- As of the termination date, the employer has no rights to any future services from the employee that meet the qualifications for WRS coverage for which wages or benefits will be paid.
- The employee is consistently treated as a former employee.
- The terminated employee has no authority to act as a representative of the employer or exercise any authority/control over employees of the employer.
- The employer has paid the employee any accumulated benefits that are customarily paid to employees at the time of termination.
The employee may not enter into an agreement for future services before his/her termination. This means that, on or before the employee’s termination date, the employee cannot:
- have any agreement for any future employment with the same WRS employer they retired from, regardless of whether that employment meets WRS eligibility participation.
- have any agreement for any future WRS eligible employment with a different WRS employer.
Educators employed under a 9- or 10-month contract are considered terminated as of the last day they are required to perform district-related work rather than the last day of their contract or the last day of the school district’s fiscal year, i.e., June 30.
Break in Service. Generally, annuitants must have a valid termination of employment and be separated from WRS employment for at least 75 calendar days before they can return to WRS-covered employment. If an annuitant does not separate for at least 75 days, the retirement will be considered invalid.
- A 75-day break in service is required when:
- An annuitant returns to any work for the same employer.
- An annuitant goes to work for a different WRS employer, if the position is expected to meet the WRS eligibility criteria.
- A 75-day break in service is not required when:
- An annuitant goes to work for a different WRS employers, if the position is not expected to meet the WRS eligibility criteria.
- An annuitant goes to work for an employer who does not participate in the WRS at all.
Return to Work. If the employee’s termination of employment date was prior to July 2, 2013, upon return to WRS eligible employment, the employee may elect to continue to receive the WRS annuity or to suspend his/her WRS annuity and participate in the WRS again.
If the employee’s termination of employment date was on or after July 2, 2013, upon return to WRS eligible employment for two thirds of full time and a 12-month period, the employee’s annuity will be suspended and the WRS will participate in the WRS again. That being said, employees terminating employment after July 2, 2013 have options depending upon when the employee was first employed in a WRS eligible position. If the employee first began working in a WRS eligible position before July 1, 2011, and the employee returns to work for a WRS employer in a position that is at least one third of full time and a 12-month period, the employee may elect whether to continue or suspend the annuity. If the employee first began working in a WRS eligible position on or after July 1, 2011, and the employee returns to work for a WRS employer in a position that is less than two thirds of full time and/or for less than a 12-month period, the employee must remain an annuitant and may not elect to participate in the WRS.
It is important to note that two-thirds of full-time is calculated as follows:
- 880 hours for teachers and school district educational support staff (not including educational support staff for technical colleges and other educational institutions).
- 1,200 hours for all other employment categories (this includes educational support staff for technical colleges and other educational institutions, i.e., CESAs).
It is also important to note that one-third of full-time is calculated as follows:
- 440 hours for teachers and school district educational support staff (not including educational support staff for technical colleges and other educational institutions).
- 600 hours for all other employment categories (this includes educational support staff for technical colleges and other educational institutions, i.e., CESAs).
If the rehired annuitant is expected to work less than two thirds of full time and less than a 12-month period, but he/she ends up working more than two thirds of full time in a 12-month period, the Department of Employee Trust Funds (DETF) will begin WRS participation upon the one-year anniversary date. The hours do not restart each year.
If a school district engages the services of an annuitant in an independent contractor capacity without meeting the 75-day break in service, there is some risk that the DETF will conclude that the independent contractor is actually an employee and the contractor relationship may negatively impact the annuitant’s access to his/her WRS annuity, especially if the annuitant performs work for the school district for more than two thirds of full time and for a period of at least 12 months. DETF requires that contractors complete, sign, and date a Rehired Annuitant form.
Conclusion. When you are hiring to fill vacant positions, and you know that a candidate for employment is a retiree for purposes of the WRS, you will want to explore with the candidate whether his/her employment with your school district will have any impact on his/her WRS annuity. You may want to encourage the candidate to review this brochure: https://etf.wi.gov/publications/et4105/download?inline= and/or to contact DETF to confirm the impact, if any, of accepting employment in your school district.
For questions regarding this article, please contact the author,
or your Renning, Lewis & Lacy attorney.