FAQ: Re-Employment After Retirement
Audience: Retired Members of the Sacramento County Employees’ Retirement System (“SCERS”)
Topic: Re-Employment after Retirement under Government Code § 31680.7
NOTE: Prior to the adoption Government Code § 31680.7, retirees of SCERS could not accept permanent employment with any participating SCERS employer. This was because (1) members were previously unable to suspend service retirement allowances and (2) participating employers were (and still are) precluded from hiring persons receiving monthly allowances from SCERS.
1. What does “re-employment” mean for retirees of SCERS?
In general, re-employment after retirement refers to a member’s ability to suspend service retirement in order to accept indefinite or “permanent, regular” employment with the employer from whom he or she previously retired. The terms, limitations and benefits of re-employment after service retirement from SCERS are dictated by Government Code § 31680.7.
2. Under what conditions is permanent, regular employment allowable for retirees of SCERS?
Permanent, regular employment is allowable when a member (1) is receiving a service retirement allowance from SCERS, (2) accepts an offer of permanent, regular employment from the final SCERS employer, and (3) makes the arrangements necessary to suspend all benefits with SCERS prior to resuming employment. In order to suspend benefits, the member must request an “Application for Suspension of Retirement Allowance” and return a completed copy to SCERS with a letter from the prospective employer.
The required letter must (a) confirm that the employer of interest (County, Court or special district) was the final SCERS employer prior to retirement, (b) indicate that an offer of permanent, regular employment has been issued, and © identify a preferred return-to-work date.
3. Is permanent, regular employment allowable for retirees who received any prior inducement to retire early?
No. Members cannot be offered permanent, regular employment under Government Code § 31680.7 if they received a prior inducement to retire early, such as a Golden Handshake. Please note that an inducement to retire early would include any arrangement that provided a higher service retirement allowance than what would otherwise be payable for the member’s unadjusted service credit at the actual age of retirement. Please note that an inducement to retire early could also include any bonus, cash-in of leave time or other form of remuneration that increases a member’s Final Compensation and is conditioned upon a decision to retire.
4. Is permanent, regular employment allowable for retirees who were awarded disability retirement benefits?
No. Members cannot be offered permanent, regular employment under Government Code § 31680.7 if they received a prior disability retirement award (service-connected or nonservice-connected). This is because reemployment under Government Code § 31680.7 is expressly limited to members who retired for service.
5. Can members who are not eligible for permanent re-employment with their last SCERS employer suspend their retirement allowance in order to work for a different SCERS employer?
No. Members can only be offered re-employment under Government Code § 31680.7 with the employer from whom they previously retired. Accordingly, persons receiving service retirement allowances cannot pursue permanent, regular employment with a different SCERS employer, nor can they elect to suspend their retirement allowance in order to do so.
6. What is the purpose of the Application for Suspension of Retirement Allowance?
The purpose of the Application for Suspension of Retirement Allowance is to (1) confirm that the retiree is eligible for permanent, regular employment and (2) ensure that the service retirement allowance is suspended prior to the return-to-work date, as required under Government Code § 31680.7. As indicated by the responses to Question 8 and 14, the suspension of an existing retirement allowance does not change the beneficiary designation for the suspended retirement allowance or cancel the survivor benefits payable to an eligible beneficiary in the event of a member’s death.
7. After an Application for Suspension of Retirement Allowance has been submitted and processed by SCERS, what happens to the suspended service retirement allowance?
An accepted Application for Suspension of Retirement Allowance cancels the monthly service retirement allowance otherwise payable by SCERS, which is a requirement for permanent, regular employment under Code § 31680.7. As illustrated under Question 11, the suspended allowance is then restarted when the member concludes the period of re-employment and paid on a going forward basis.
8. Does an Application for Suspension of Retirement Allowance affect the beneficiary designation or payment election in place for the initial SCERS benefit?
No. Payment elections and beneficiary designations made at retirement are irrevocable and remain in force for all periods after retirement – even if the member later suspends his service retirement allowance in order to accept permanent, regular employment.
In 2005, Jean retires from SCERS with 20 years of Miscellaneous Tier 3 service and names her spouse, Scott, as sole beneficiary of the plan’s Unmodified form of payment. In 2010, Jean receives an opportunity to return to permanent, regular employment with her final SCERS employer.
If Jean chooses to suspend her service retirement allowance in order to accept permanent, regular employment, she will need to complete a new Member’s Affidavit form upon her return. At that time, Jean may name Scott as beneficiary of all future service with SCERS or name a different person altogether, subject to the plan’s notification and consent requirements. However, Jean cannot revoke Scott’s status as beneficiary of her prior service while they remain married or nominate another beneficiary to receive the survivor annuity or “Continuance” already reserved for Scott.
9. Does an Application for Suspension of Retirement Allowance affect other group benefits offered to retirees of SCERS?
Yes. Eligibility for retiree group benefits (particularly the group insurance programs offered by Sacramento County for former County employees and others) is conditioned on receipt of a retirement allowance. Accordingly, the decision to suspend a retirement allowance and accept permanent, regular employment will affect group benefit options and, by extension, any required premium payments.
Former employees of Sacramento County should consult the Administrative Policy for the Retiree Medical and Dental Insurance Program and/or contact the Employee Benefits Office if they have concerns about the impact of permanent re-employment on group benefits, coverage and premium payments. Former employees of the Superior Court and other special districts that do not participate in the group insurance programs offered by Sacramento County should contact their employer’s Human Resources division if they have questions about the differences between group benefits offered to retired and active employees.
10. Following the acceptance of an Application for Suspension of Retirement Allowance by SCERS, do re-employed retirees “re-enter” and contribute to SCERS?
Yes. Retirees who are re-employed under Government Code § 31680.7 reenter SCERS immediately and begin another period of active membership, which is referred to as a “period of re-employment.” During a period of reemployment, members hold the same membership category and tier that they did on their original retirement date and contribute to SCERS under rules established during their original employment. As a result, members earn service credit and the right to receive additional benefits under the same category, tier and benefit formula considered for their original retirement allowance, which covers the timeframe known as the “original period of employment.”
Logan retires from SCERS in 2002 with 25 years of Miscellaneous Tier 1 service. Because he retires prior to the enhancement of retirement benefits in 2003, Logan’s retirement allowance is paid in accordance with Government Code § 31676.1, which provides a benefit that can be described as “1.5% at 55.”
After receiving an offer of permanent, regular employment with his final SCERS employer and deciding to suspend his service retirement allowance in order to accept it, Logan re-enters SCERS in 2010. Because Logan’s original retirement allowance is based on a “1.5% at 55” benefit, the contributions that he makes and the service credit that he earns during his period of re-employment will still reflect the same, “un-enhanced” formula.
11. What happens when retirees terminate employment again and conclude their period of re-employment?
Upon conclusion of a period of re-employment for reasons other than death or disability, members receive a new service retirement allowance, which includes the following three components
- The monthly retirement allowance previously paid by SCERS for the original period of employment, which was suspended in order for the member to accept permanent, regular employment.
- An adjustment to that monthly allowance, which reflects any cost-of-living increases that would have been earned if the member had not suspended the original retirement allowance to obtain permanent, regular employment.
- A second monthly retirement allowance based on the service credit and Final Compensation earned during the period of re-employment, as well as the member’s age upon conclusion of the period of re-employment.
Kate retires from SCERS in 2007 with 20 years of Miscellaneous Tier 3 service and, in accordance with Government Code § 31680.7, returns to permanent, regular employment in May 2010. Assuming that Kate (a) suspends a retirement allowance of $2,500 per month, (b) foregoes annual retiree cost-of-living increases of 1.00% per year, and © retires again in February 2014 with a second retirement allowance of $500 dollars per month, Kate’s service retirement allowance will be calculated as follows:
Retirement Allowance Suspended (original service) – $ 2,500.00
Cost-of-Living Increases by Year
Monthly Adjustment for 2011 $ 25.00
Monthly Adjustment for 2012 $ 25.25
Monthly Adjustment for 2013 $ 25.50
Retirement Allowance Earned (additional service) $ 500.00
Total Service Retirement Allowance $ 3,075.75
As noted in response to Question 8, the benefits payable for the period of reemployment require separate payment elections and beneficiary designations, which can reflect decisions that are different from those in place for the original period of employment. As explained in response to Question 10, the service retirement benefits payable for a period of reemployment always consider the membership category and tier in place for the original period of employment.
Please note that members who requested Social Security Advance payments (which are often described as “temporary annuities”) for their original period of employment will see their retirement allowances increase further if they conclude re-employment prior to age 62. For additional information regarding the resumption and adjustment of retirement allowances paid as temporary annuities, please contact the SCERS office at (916) 874-9119.
12. When retirees terminate employment again and conclude their period of re-employment is the suspended retirement allowance restarted retroactively?
No. Because a person cannot be a permanent, regular employee and receive an allowance from SCERS at the same time, the restarted allowance is prospective only and does not restore any retirement benefits on a retroactive basis.
13. What happens if retirees become disabled during the period of reemployment?
If a member becomes disabled during a period of re-employment and is granted service-connected or nonservice-connected disability retirement, the disability retirement allowance shall be the greater of two benefit options:
- The disability retirement allowance that would have been payable if (1) the member had not originally retired and (2) the service attributed to the original period of employment and the period of re-employment was continuous and uninterrupted.
- The service retirement allowance that would have been payable if (1) the member had not originally retired and (2) the service attributed to the original period of employment and the period of re-employment was continuous and uninterrupted.
14. What happens if retirees die during the period of re-employment?
If a member dies during a period of re-employment and leaves one or more eligible beneficiaries, the total survivor annuity or “Continuance” shall equal the benefit that would have been payable if the service attributed to the original period of employment and the period of re-employment was continuous and uninterrupted. Otherwise, the total benefit shall be a lump sum consisting of any Basic contributions and interest not already distributed as part of the member’s original retirement allowance.
15. Who should retirees contact if they have further questions regarding permanent, regular employment and its impact on their SCERS benefits?
Retirees with questions regarding the impact of permanent re-employment should contact the SCERS office:
Sacramento County Employees’ Retirement System
980 9th Street, Suite 1900
Sacramento, CA 95814
Phone: (916) 874-9119
Fax: (916) 874-6060.
However, retirees with questions about job opportunities, reemployment processes or other post-retirement benefits provided by their former employers should contact the former employer’s Human Resources division or personnel office directly. In doing so, retirees should understand that they may not enroll in, contribute to, or earn additional service credit with SCERS unless (1) service retirement benefits have been suspended and (2) permanent, regular employment has commenced.