Working after Retirement

Overview

Working After Retirement

There are two ways retirees may return to work with a CCCERA employer: by suspending their retirement to return to full-time employment and reinstating as an active CCCERA member (this is referred to as a “reinstatement”), or on an approved, limited basis while receiving their pension.

Reinstatement to Active Service After Retirement

After retirement, if you return to work in a position eligible for membership in CCCERA, you may be reinstated as an active member, without being subject to the restrictions that apply if you had continued to receive your pension.

You will not receive a retirement allowance while you are working. Retirement contributions will be taken from your salary and you will earn retirement service credit, just as you did prior to retirement. Your contribution rate will be the same percentage (flat rate) as all other members in your tier. When you retire again, your new benefit will be calculated on the most recent credited service. That benefit amount will be added to your original retirement allowance, plus any retiree cost-of-living increases granted while you were reemployed. Contact a CCCERA counselor to verify what retirement tier you will be in upon reinstatement.

Retirees Returning to Work – Federal and State Law Restrictions

In situations where the County or district believes a CCCERA retiree possesses special skills or knowledge, the law allows the employer to hire that retiree on a temporary basis for a limited duration without suspending the retiree’s retirement allowance; however, restrictions apply.

The 960 hour rule: An eligible retiree may return to work for up to 960 hours in a fiscal year and continue to receive his/her retirement allowance.

During this post-retirement employment, the member will not accrue any additional CCCERA pension benefits, nor will the member or the employer pay contributions for this service.

The 180 days rule: Retired members must wait 180 days from their date of retirement before returning to work for the County on a temporary basis, except under the following conditions:

If the employer certifies the nature of the employment and that the appointment is necessary to fill a critically needed position before 180 days have passed and the appointment has been approved by the Board of Supervisors (or the district’s governing body) in a public meeting.

If the retiree is a public safety officer or firefighter hired to perform a function that is regularly performed by a public safety officer or firefighter.

Members who received a retirement incentive, such as an early separation payoff or a “golden handshake”, are not eligible to return to work until after 180 days following the date of retirement.

The 90 day rule: Notwithstanding the above conditions, to comply with IRS regulations regarding in-service distributions and protect the retirement fund’s tax-qualified status, a member under the normal retirement age may not return to temporary County or district service within 90 days of his or her retirement date. The 90-day waiting period is referred to as a bona fide separation from service period.  Members who retire at ages younger than Normal Retirement Age (67 for PEPRA General members) must have a bona fide separation from service. This means that they must truly cease employment in order to collect a retirement allowance, and there must not be a pre-existing agreement with the employer to return to work after retirement.  If a member is re-employed in violation of the bona fide separation from service rules, the retirement allowance must be suspended and will not resume until the member has a bona fide separation from service or reaches the Normal Retirement Age.

Limits on Pay Rate: During his or her temporary employment, the retiree shall be paid at a rate not less than the minimum nor greater than the maximum rate paid by the employer to other employees performing comparable duties.

Restrictions for Unemployment Insurance Recipients:  Any retired person who, during the 12-month period prior to a temporary appointment described in this section, has received unemployment insurance resulting from prior County or district employment, is not eligible to be employed and must wait 12 months before being eligible. Upon accepting an offer of employment, a retiree must certify in writing that he or she is in compliance with this requirement.

Additional Taxes on Retirement Allowances when Retirees Return to Work under CCCERA

Even in cases where the retiree is eligible to work for a CCCERA employer while receiving a retirement allowance from CCCERA without violating federal or state law, that retirement allowance could be subject to a 10 percent additional federal tax under Internal Revenue Code 72(t) and a 2.5 percent additional California state tax under California Tax Code 17085(c)(1).  These additional taxes apply to retirees under the age of 59 ½, even if they are over Normal Retirement Age if they did not have a bona fide separation of service (i.e., the required minimum continuous 90-day separation from service and no pre-existing agreement with the employer to return to work after retirement.)

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