With the recent increase in retirement activity, the employer must be aware of the rules on rehiring annuitants, and should proceed with some caution.
The Wisconsin Retirement System (WRS) is required to fully comply with all provisions of the federal Internal Revenue Code (IRC). The payment of a retirement benefit without a bona fide separation from State service is prohibited under the federal IRC. Separation from service has been interpreted to mean a complete severance of the employer/employee relationship.
When the Wisconsin Department of Employee Trust Funds (ETF) investigates whether a retirement and subsequent reemployment has been legitimate, the length of time between retirement and reemployment may be considered but evidence of a prior intent to return to work will be determinative.
For an employee to receive a WRS retirement benefit and still return to WRS-eligible employment there must be a valid termination and a break in service.
No person may receive any retirement annuity, separation benefit or lump-sum payment from the WRS without first terminating from his or her current participating employment with all participating employers. Whether the termination is voluntary or involuntary, the employer and employee must act with the good-faith intent of ending the employee-employer relationship. At the time of the retirement, the following conditions must be met:
- The employee ceases to render compensable service to the employer and the employer has no further rights to any future services;
- The employer and employee must comply with their own policies governing termination, including the filing of a letter of resignation if applicable;
- The employee has no rights to any future compensable employment, such as having an oral or written contract for future employment;
- The employee is treated consistently with the status of “former employee” and is no longer eligible for the benefits received exclusively by active employees;
- The employee has no authority to act on behalf of the employer; and
- The employer pays out any accumulated benefits.
For more information, see Wisconsin Administrative Code ETF 10.08(2)
3. Break in Service
Employees who terminate WRS-eligible employment are ineligible for any benefit upon return before the latest of the following:
- The day after the annuity’s effective date;
- The thirty-first day after the benefit application is received; or
- The thirty-first day after termination.
The Wisconsin Department of Employee Trust Funds also has information regarding the rehiring of annuitants.
A rehired annuitant may elect to return to active WRS coverage. The annuity will be cancelled until the employee retires again and reapplies for the annuity.
A rehired annuitant may elect not to return to active WRS coverage. The annuity will continue but no new creditable service will be earned. The employee will be ineligible for active ETF insurance and no WRS contributions are made.
The choice for a rehired annuitant as to whether to return to active WRS-coverage must be made by the employee and cannot be made by the employer.