Working after retirement

I am confused about the rules on working after retirement. Could you please clarify the restrictions and when they apply?

Are there any limitations on the amount of time that a rehired retiree may work or the amount of money that he or she may earn?

How do you calculate the amount that the rehired retiree can earn?

Given the salary limitations, what is the procedure for paying the rehired retiree?

If the amount earned will exceed those limitations, what are the retiree’s options?

Can a retired teacher or administrator who waives retirement benefits and then accepts a full-time, paid position, later have his or her retirement allowance reinstated for 960 hours during any calendar year?

Whose responsibility is it to keep track of the number of hours worked and money earned by the retiree?

If a teacher or administrator is rehired as a “consultant,” do the restrictions on post-retirement employment still apply?

Are “leased employees” subject to these restrictions?

What is an employee leasing arrangement?

I will be retiring June 30, and beginning September 1, 2008, plan to work as a public school administrator under an employee leasing arrangement. How and when does this policy affect me?

Is the rehired retiree subject to Social Security deductions?

For more information: PERAC memos regarding restrictions on post-retirement public sector employment in Massachusetts

• July 2, 2008: Memorandum #24, 2008
• May 19, 2004: Memorandum #20/2004 (pdf; 1 page)
• January 12, 2004: Memorandum #3/2004 (pdf; 2 pages)

I am confused about the rules on working after retirement. Could you please clarify the restrictions and when they apply?

Pursuant to M.G.L. c. 32, § 91(e), the earnings limitations on re-employment of retirees in Massachusetts public schools are eased in the event of a “critical shortage” in a position as determined by the Department of Education, now known as the Department of Elementary and Secondary Education, or ESE. The ESE has adopted regulation 603 CMR 7.03(2)(b), allowing the Commissioner of Elementary and Secondary Education to deem that a district has a “critical shortage” upon the request of a superintendent and demonstration that the district has made a good-faith effort to hire non-retirees and has been unable to find them. The “critical shortage” application process is similar to that for requesting a waiver for certification. In brief:

Restrictions on working after retirement	If NO critical shortage	If a critical shortage IS declared
	ALL MTRS Retirees	Regular	RetirementPlus
1) Separation from service: 60 days. Exception: This particular restriction does not apply if the member retired either at age 65 or older or at the maximum benefit amount of 80 percent of his three-year salary average.	Applies	Applies	Applies
2) Time limitation: 960 hours in a calendar year.	Applies	Waived	Waived
3) Earnings limitation: The salary received from this position, when added to the MTRS retirement allowance, cannot exceed the salary that is currently being paid for the position from which the employee retired.	Applies	Waived	Applies for first two years of employee’s retirement; waived thereafter

School districts wishing to take advantage of the “critical shortage” provision of M.G.L. c. 32, § 91(e) are advised to consult with the Department of Elementary and Secondary Education for guidance on the certification requirements for re-employed retirees.

Are there any limitations on the amount of time that a rehired retiree may work or the amount of money that he or she may earn?

Yes, there are service and salary restrictions. While a former teacher or administrator is collecting a retirement allowance from the Massachusetts Teachers’ Retirement System, he or she may work for a public employer in Massachusetts for a maximum of 960 hours in a calendar year. However, the salary that the person receives from this position, when added to his or her retirement allowance, cannot exceed the salary that is being paid for the position from which he or she retired. This rule is contained in Massachusetts General Laws c. 32, § 91.

The amount that the rehired retiree can earn is equal to the difference between the annual amount currently being paid for the position from which the retiree retired, and the retiree’s annual pension. This holds for the retiree’s first year of retirement as well as all following years.

For example:

• Tess Teacher retired on June 30, 2007, with an annual retirement allowance of $48,000.
• She returned to teaching on September 1, 2007, and worked through December 31 (without exceeding the limit of 960 hours per calendar year).
• The position from which Tess retired, based on her step and education level, now pays $65,000 per year.
• For her teaching service from September 1 through December 31, 2007, Tess can earn $17,000.

Likewise, if the position from which she retired continues to pay $65,000 in the following year, Tess may earn a total of $17,000 in post-retirement earnings in all of calendar year 2008.

Given the salary limitations, what is the procedure for paying the rehired retiree?

The rehired retiree is entitled to receive the full weekly salary of the position for which he or she is re-employed until he or she has received an aggregate amount which, when added to his or her annual pension, will equal, in that calendar year, the annual salary currently being paid for his or her former position.

If the amount earned will exceed those limitations, what are the retiree’s options?

If the retiree wishes to work in a position that will exceed the time or earnings limitation, he or she may notify the MTRS in writing to waive his or her retirement allowance for the period of employment. Upon completion of the employment, the retiree may resume receiving his or her retirement allowance at the same level of benefits he or she had before waiving the allowance, plus any cost-of-living adjustments passed by the Massachusetts Legislature. (In other words, the retiree cannot recoup his or her retirement benefits for the period during which he or she waived them.)

Can a retired teacher or administrator who waives retirement benefits and then accepts a full-time, paid position, later have his or her retirement allowance reinstated for 960 hours during any calendar year?

No. The law does not permit retirees who waive their retirement benefits and then accept public employment to supplement their incomes by the device of reinstating their retirement allowances for the 960-hour period during the calendar year.

Whose responsibility is it to keep track of the number of hours worked and money earned by the retirees?

It is the responsibility of the rehired retiree to provide his or her employer and the treasurer of the city or town (or the source responsible for paying the retiree) with a certification of the length of time worked and the amount of income earned in a given calendar year. If either the period worked or the income earned exceeds the allowable amount, the rehired retiree can no longer be employed and the excess earnings must be returned to the appropriate treasurer or entity responsible for paying the retiree. In the case of excess or improper retirement payments, the MTRS has the authority either to require repayment or to offset the amount received against future retirement payments.

If a teacher or administrator is rehired as a “consultant,” do the restrictions on post-retirement employment still apply?

Yes. The restrictions set forth above apply to both employees and non-employees; except for services performed for the general court as a non-employee, the law makes no distinction between employees and non-employees. Accordingly, if a teacher or administrator is receiving a retirement allowance and is being paid as a “consultant,” the restrictions on hours and earnings do apply.

Are “leased employees” subject to these restrictions?

Yes. M.G.L. c. 32, § 91(a) prohibits all retirees from “render[ing] service” to any public employer, including school districts. Section 91(b) provides a general exception to this prohibition, allowing post-retirement employment for up to 960 hours in any calendar year, and limiting annual earnings to the difference between the retiree’s retirement allowance and the salary being paid for the position from which he/she retired. The Massachusetts Teachers’ Retirement System (MTRS) interprets “render[ing] service” to include work under an employee leasing arrangement, and thus such arrangements are subject to the restrictions of section 91.

What is an employee leasing arrangement?

An employee leasing arrangement is one where one company (the “Leasing Company”) loans or hires out its employee to another (the “Client Company”). The “leased” employee is paid by the Leasing Company and may report occasionally to the Leasing Company. While working for the Client Company, however, the employee and his/her work are directed and controlled by the Client Company and the employee typically uses the Client Company’s work space and equipment to accomplish his/her work. A common example is a “temp” agency that supplies temporary workers. Since the law has often regarded “leased” employees as employed by both the Leasing Company and Client Company, it is clear that a “leased” employee “renders service” to the Client Company.

In the education context, some companies supply interim school administrators under “leasing” arrangements, who are directed in their day-to-day activities by the school district. Of course, superintendents, assistant superintendents and principals are by law appointed, employed and directed by their respective superiors (ultimately, the school committee). General Laws c. 71, §§ 59 and 59B. Thus, the System regards “leased” employees in such positions to be “render[ing] service” to the district and thus subject to the limitations of section 91(b).

I will be retiring June 30, and beginning September 1, 2008, plan to work as a public school administrator under an employee leasing arrangement. How and when does this policy affect me?

At the beginning of the 2008–09 school year, your employment will be subject to the time and earnings restrictions in § 91(b). Beginning in July 2008, when the MTRS becomes aware of retirees serving as “leased” employees, the MTRS will work with the employing school district to determine whether—and the extent to which—the limits may have been exceeded, and afford the district the opportunity to exercise its rights, if any, to recoup the excess pursuant to section 91(c). If the district does not recoup the excess earnings, the MTRS will do so through an offset of the member’s retirement allowance.

Is the rehired retiree subject to Social Security deductions?

No. Whether retired teachers or administrators return to work and either waive their retirement allowances or work within the service and salary limitations, they are considered “rehired annuitants” by the Internal Revenue Service, and may be treated as members of the Massachusetts Teachers’ Retirement System even though they do not actually receive any additional benefit accruals for post-retirement service. Accordingly, a rehired retiree who is working in a position that would otherwise be covered by the MTRS would still be considered a “member” of a retirement system and, therefore, not eligible for Social Security coverage.