PENN STATE - HUMAN RESOURCES

Policy HR45 Post-Retirement Appointments

POLICY'S INITIAL DATE: November 16, 1962
THIS VERSION EFFECTIVE: February 15, 2012

Contents:

  • Purpose
  • Definitions
  • State Employees' Retirement System
  • Public School Employees' Retirement System
  • SERS and PSERS Emergency Return to Service Factors
  • Additional Considerations for SERS and PSERS Annuitants
  • Teachers Insurance and Annuity Association/College Retirement Equities Fund Annuitants
  • Determining Rate of Pay
  • Services as an Independent Contractor
  • Procedure
  • Notifications
  • Cross References

  • PURPOSE:

    To establish a consistent, University-wide policy on hiring SERS, PSERS, and TIAA-CREF annuitants. When an employee of the University retires, this action will, in most cases, conclude the person’s employment with the University. The University expects and requires effective succession planning. University retiree re-employment cannot be used as a substitute for developing well-qualified faculty and staff. This policy establishes University procedures to be followed in the event a post-retirement appointment of an annuitant is necessary.

    DEFINITIONS:

    A “SERS annuitant” is any individual receiving a pension from the State Employees’ Retirement System.

    A “PSERS annuitant” is any individual receiving a pension from the Public School Employees’ Retirement System.

    A “TIAA-CREF annuitant” is any individual receiving a pension from the Teacher’s Insurance and Annuity Association/College Retirees Equity Fund.

    STATE EMPLOYES' RETIREMENT SYSTEM:

    Other than a few limited exceptions, Pennsylvania law provides that a SERS annuitant may not be employed by the University, either full-time or part-time, and continue to receive annuity payments from the State Employees’ Retirement System. Employment other than under these specific exceptions will result in the termination of SERS annuity payments for the period of such employment; in addition, other penalties may apply. Upon hire, all SERS annuitants must sign a waiver that states as follows:

    “I understand and acknowledge that returning to service with the University may freeze and adjust the present value of my annuity, and, in certain circumstances, doing so may impact the benefits I will receive when I retire again.”

    Pennsylvania law provides that a SERS annuitant may continue to receive his or her annuity, in accordance with the following provisions: 1) there exists an emergency situation that creates an increase in the workload such that there is a serious impairment of service to the public (emergency return to service); 2) in special circumstances that permit the individual to be retained as an independent contractor (IRS regulations narrowly proscribe the circumstances under which an annuitant may be considered an independent contractor).

    In all cases, one pay period must have elapsed following termination of or retirement from full-time employment prior to a post-retirement appointment.

    In the event of an emergency return to service of a SERS annuitant, he or she must be paid on the wage payroll and the period of such employment may not exceed an aggregate of ninety-five (95) working days in one calendar year. Any amount of time worked less than one-half of a day shall be counted as one-half a day for the purposes of calculating time worked; time worked in excess of one-half a day shall be counted as a full day. The wages received shall not be considered compensation for retirement purposes. The service performed will not be considered creditable service and, as such, no SERS contributions will be withheld. The individual must be advised in writing of these conditions prior to accepting the post-retirement appointment. Any University retiree benefits in effect prior to post-retirement appointment shall continue.

    PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM

    Other than a few limited exceptions, Pennsylvania law provides that a PSERS annuitant may not be employed by the University, on a part-time basis, and continue to receive annuity payments from the Public School Employees’ Retirement System. Employment other than under these limited exceptions will result in the termination of PSERS annuity payments for the period of such employment; in addition, other penalties may apply. Upon hire, all PSERS annuitant hires must sign a waiver that states as follows:

    “I understand and acknowledge that returning to service with the University may freeze and adjust the present value of my annuity, and, in certain circumstances, impact the benefits I will receive when I retire again.”

    A PSERS annuitant may be hired and continue to receive his or her annuity, in accordance with the following provisions: 1) an emergency exists that creates a serious impairment of service or there is a shortage of subject-certified teachers (emergency return to service); 2) if employed part-time in an extra-curricular capacity, performed primarily outside the regular instructional hours and not part of the mandated curriculum; 3) if employed full-time and enrolled in an alternate approved pension plan offered by the University; 4) in special circumstances that permit the individual to be retained as an independent contractor (IRS regulations narrowly proscribe the circumstances under which an annuitant may be considered an independent contractor). In all cases, 90 days must have elapsed following termination of or retirement from full-time employment prior to a post-retirement appointment.

    In the event of an emergency return to service of a PSERS annuitant, he or she must be paid on the wage payroll and the period of such employment may not exceed beyond the length of the school year (fall to summer) in which the emergency or shortage occurs. The wages received shall not be considered compensation for retirement purposes. The service performed will not be considered creditable service and, as such, no PSERS contributions will be withheld. Any University retiree benefits in effect prior to post-retirement appointment shall continue. The individual must be advised in writing of these conditions prior to accepting the post-retirement appointment.

    In addition, PSERS annuitants hired in a part-time extra-curricular (for example, activities such as ushering at Bryce Jordan Center events or other sporting events) capacity, the retiree will need to sign a waiver with the following language:

    “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 benefits (including but not limited to benefits 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 benefits that could arise from service performed under this contract.”

    Keep a copy of the signed waiver with employment records and provide a copy to the annuitant.

    SERS AND PSERS EMERGENCY RETURN TO SERVICE FACTORS:

    In the absence of a reason to conclude otherwise, SERS and PSERS will rely on a participating employer’s (Penn State’s) determination that an “emergency creates an increase in the workload such that there is serious impairment of service to the public,” justifying an annuitant’s return to service in a post-retirement appointment. If, however, SERS or PSERS has reason to believe that the return to service might not meet the standards set by law, an investigation will be undertaken, and if necessary, a member’s retirement benefits will be adjusted. The adjustment of retirement benefits could include requiring the member to repay annuity payments improperly received, recalculating service credit, or other appropriate corrections to ensure that retirement funds are properly dispersed.

    Factors that the courts have considered, and therefore, that Penn State will consider before hiring an annuitant under emergency return to service provisions are set forth below. In the event that SERS or PSERS investigates the circumstances of an annuitant’s return to service, these factors and any other relevant factors will be taken into consideration.

    Test of Notice and Timing

  • Whether there was a bona fide break in service between retirement and return to a post-retirement appointment
  • The amount of time before retirement that the member notifies the employer of their intent to retire
  • Whether the rehiring was planned before the retirement
  • Whether, taken together, the retirement and rehiring appeared to be a preconceived retirement plan
  • Whether the employee created the so-called “emergency” by retiring
  • Test of Recruitment and Hiring Approval

  • Whether the employer sought approval to replace the terminated employee
  • Whether approval to hire was granted, and if so; when
  • Whether the employer immediately undertook a search for a replacement promptly upon notice of the employee’s retirement
  • Whether the employer conducted a search for a replacement before re-hiring the annuitant
  • Whether there was a shortage of appropriate personnel
  • Whether the employer made a bona fide effort to fill the emergency vacancy with a non-retiree
  • Whether the re-hire was for a discreet period or whether it was to last only until a successor was hired
  • This list is not exclusive. Penn State may also consider any other factor(s) that would be useful in determining whether the standards of emergency return to service are satisfied. SERS/PSERS will consider all relevant factors using a preponderance of evidence standard in conducting an investigation.

    ADDITIONAL CONSIDERATIONS FOR SERS AND PSERS ANNUITANTS:

    Annuitants who are contemplating a post-retirement appointment or who are being approached to return to service in any capacity, including under the applicable extra-curricular or emergency return to service provisions, should be encouraged to consult the SERS or PSERS Regional Counseling Center in their area. Retirement counselors are available to provide important information and factors to consider so that the individual returning is fully aware of the consequences of the decision.

    TEACHERS INSURANCE AND ANNUITY ASSOCIATION/COLLEGE RETIREMENT EQUITIES FUND ANNUITANTS:

    A TIAA/CREF annuitant may be employed by the University only on a temporary basis and continue to receive such annuity payments to which he or she is entitled. When an employee of the University retires, this action will, in most cases, conclude the person’s employment with the University. The University expects and requires effective succession planning. University retiree re-employment cannot be used as a substitute for developing well-qualified faculty and staff.

    The retiree shall be paid on the wage payroll and wages received on post-retirement appointment shall not be considered compensation for retirement purposes. The service performed will not be considered creditable service and, as such, no contributions will be withheld. The individual considering returning must be advised in writing of these conditions prior to accepting the post-retirement appointment. Any University retiree benefits in effect prior to the post-retirement appointment shall continue.

    DETERMINING RATE OF PAY:

    The rate of pay for a post-retirement appointment shall be recommended by the dean or administrative officer and approved by the Vice President for Human Resources (or designee), in consultation with the Vice Provost and other administrators as necessary and appropriate. When determining an annuitant’s rate of pay, the dean or administrative officer will consider the following nonexclusive list of factors: salary at time of retirement; market; departmental budget; and type of responsibilities to be performed. In general, an annuitant’s rate of pay should not exceed the hourly equivalent of the University salary earned at the time of retirement, with adjustmen permissible for any general salary increases that have occurred in the interim. Teaching responsibilities will be compensated with an eye toward the University’s “Part-time Faculty, Fixed-Term II” schedule (see HR06 – Types of Appointments). Other responsibilities such as research shall be prorated as appropriate to the workload and compensation in the respective work unit.

    SERVICES AS AN INDEPENDENT CONTRACTOR:

    The tax law narrowly proscribes circumstances under which a retiree providing services to the University may be considered to be an independent contractor. Thus, a retiree providing services (including one who has affiliated with a separate company or business entity) may only be compensated outside of the University’s Payroll System if he or she is performing services entirely separate and unrelated to his or her prior University employment duties. Such services must be distinct from the retiree’s prior employment duties and be performed outside of the College or Unit from which the individual retired. Retirees being employed through “temporary agencies” are subject to the same guidelines. Guidance must be sought, and approval given by the University’s Tax Director (or designee), before commitments are made to retain the services of a retiree as an independent contractor.

    PROCEDURE:

    Discussions about post-retirement appointments or services as an independent contractor between the individual and the department head/supervisor, area Human Resources Representative, and the Office of Human Resources should occur as soon as the need for post-retirement appointment is identified by the area and before initiating action. In this way, guidance can be provided to benefit both the University and the employee and remain in compliance with the requirements of SERS. All post-retirement appointments must be approved by either the Office of Human Resources or Tax Office in advance. Post-retirement appointment approval cannot be granted retroactively.

    Employment Appointment

    For all post-retirement situations, prior to any commitment being made, a letter requesting a post-retirement employment appointment shall be initiated by the department head or supervisor, endorsed by the appropriate dean or administrative officer, submitted to the Human Resources Representative who submits the request to the Vice President for Human Resources (or designee) for approval. The request shall contain specific information on the need, suggested pay, length of time of recommended employment or retention of services, and a summary of steps that have been taken to solve the problem in another way.

    Appointment Outside the Payroll

    Prior to any commitment being made to pay a retiree that will be compensated outside of the Payroll System, a letter requesting a post-retirement appointment of an independent contractor (or business entity supplying a retiree’s services) shall be initiated by the department head or supervisor, endorsed by the appropriate dean or administrative officer, and submitted to the University’s Tax Director (or designee) for approval. The letter of request shall contain specific information on proposed duties and pre-retirement employment duties. If the proposed arrangement is with a business/company employing the retiree, the request shall contain additional information regarding the business/company’s activities prior to contracting with the University, retiree ownership interest, and other company employees who can provide the required services.

    NOTIFICATIONS:

    The Vice President for Human Resources (or designee) shall inform the Human Resources Representative and dean or administrative officer of the disposition of a request. The Employee Benefits Division is responsible, for notification in writing to the State Employees’ Retirement Board indicating the name of an SERS annuitant, social security number, justification for post-retirement appointment, the starting and termination dates, and the hourly rate of pay.

    Updates:

    February 15, 2012-Revised policy.

    January 26, 2011 - Added "or designee" throughout policy.

    Cross References:

    HR29 - Voluntary Phased Retirement Program

    HR54 - Continuation of Group Insurance After Age 60, Age 65, and After Retirement or Death

    RAG09 - Processing Sponsered Projects Involving Retired Faculty Participation


    top of this policy GURU policy menu GURU policy search
    GURU home GURU Tech Support Penn State website