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Employment
after Retirement
PLEASE NOTE: The provisions for public employment after retirement have changed due to recent legislation. In addition to the information below, employers and retirees should review the information in the following fact sheets.
All
Funds When
a "Dual" Member Retires
A
"dual" member, that is, someone working in positions covered by more
than one NJ State-administered retirement system (e.g., PERS and PFRS, TPAF and
PERS, etc.), is permitted by law to retire from one position and receive the pension
from that system without affecting the pension enrollment in the second retirement
system.
For example, a police
officer (PFRS) who also works in a PERS-covered position is a member of both pension
funds. If the officer retires and receives a pension based on service under the
PFRS position, the PERS membership is not affected and pension credit under the
PERS may still be earned. Public
Employees Retirement System (PERS)
IRS Provisions
A PERS retiree who returns to public employment before age 59½ may be subject to 10 percent additional federal tax withholding for an in-service distribution under the Internal Revenue Code. Because this issue is fact sensitive, a retired New Jersey public employee considering a return to public employment should consult with the Internal Revenue Service or a qualified tax consultant and is strongly advised to use caution if considering a return from retirement to public employment.
Bona Fide Retirement
In applying the return to employment provisions described throughout this section, it is assumed that the PERS retirement is considered to be “bona fide.”
This means the retiree has made a good faith action to retire and that the employer-employee relationship is completely severed.
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A “bona fide” retirement must also be “due and payable.” A PERS member's retirement does not become “due and payable” until there has been a cessation of employment of at least 30 days following his or her retirement date, or 30 days following approval of his or her retirement by the PERS Board of Trustees, whichever is later. If a retired PERS member returns to a PERS covered position — on either a paid or voluntary basis — before the 30 days have elapsed, the member should expect to continue enrollment in the PERS. His or her retirement will be considered invalid, and he or she will remain an active employee under his/her original PERS account.
Note: N.J.A.C. 17:2-2.6(a) requires that employees who work a 10-month school year and retire on July 1 or August 1, must count the 30-day break in service from the start of the following normal school year in September.
Other situations where a retirement may not be considered “bona fide” include, but are not limited to, the following examples:
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If a New Jersey public employee makes arrangements prior to his/her retirement to return to the same or similar public employment as a regular employee, contract employee, leased employee, or an independent
contractor, the employer-employee relationship
has not been completely severed —
regardless of the length of any break in
employment — and the retirement will be
determined to be invalid. In this case the member would be required to remain an active employee
in the new
position, under the PERS.
-
If a retired member is re-employed or appointed by the
same employer to the same or a similar position
that would have qualified for continued
membership in the retirement system had the
retirement not occurred, this may indicate that
the employer/employee relationship has not
been completely severed and, therefore, the retirement may be determined to be invalid. In
this case the member would be required to remain an
active employee under the retirement system
in the new position.
If a member's retirement is determined to be invalid (not
“bona fide”), he or she will be required to reimburse the
retirement system for the amount of any retirement
benefits received from the date of retirement and
be required to pay pension contributions in the form
of back deductions going back to the date when the member should have been reenrolled.
There is no limitation
on the amount of reimbursement that may be
recovered by the retirement system in these situations.
The information contained in the rest of this section assumes that the returning retiree has a “bona fide” retirement. If it is established at any time that the retirement was not made in good faith or that the employer-employee relationship was not completely severed, the provisions described below will not apply.
Effect
of Post-retirement Employment on a PERS Retirement
(See
also Fact Sheet #21)
Working
for private industry, the federal government or a government agency in another
state will not normally affect a member's Public Employees' Retirement System
(PERS) retirement benefits. (See the "Disability
Retiree" section below for exceptions to this.) Returning to public
employment in New Jersey after retirement, however, could affect retirement benefits,
as shown below.
Note: The information contained below assumes that the returning retiree has a "bona fide" retirement. If it is established at any time that the retirement was not made in good faith or that the employer/employee relationship was not completely severed, the provisions described below will not apply.
If
a PERS Retiree Returns to Work in PERS-covered Position
Mandatory
Reenrollment
In
addition to the State agencies, over 1800 local employers throughout New Jersey
participate in the PERS. A retired member should expect to reenroll in PERS when
accepting public employment, when the employment meets the following conditions:
- The employee will work at least the minimum number of hours per
week required for enrollment (35 hours for State employees or 32 hours for local government or State or local education employees);
- The employment is on a regular basis and
the position is covered by Social Security, and
- The
member's aggregate annual compensation (total yearly earnings) from all PERS employing
locations will be more than $15,000 (except
disability retirees), and
- The employee
is not required to be a member of any other New Jersey State or local government
retirement system on the basis of the same position; or
- The
employee retired on a disability retirement and will now earn at least the minimum annual salary of the original membership tier.
However,
a retiree who returns to a covered position
cannot join the PERS if any of the following are true:
- The employee works less than 35 hours per week at a State employing location, or less than 32 hours per week at a local employing location.
- The employee's aggregate
annual salary (total yearly earnings) from all PERS positions does not exceed $15,000 or
for those retired on
a disability retirement, the minimum annual salary for the original membership tier;
- The employee's
position is not covered by Social Security;
- The
employee is receiving a pension from another NJ State-administered retirement
system;
- The employee is receiving a
pension from a NJ local or county government pension fund;
- The
employee is a seasonal employee; or
- The
employee is an elected public official who retired from a public retirement system
in this or any other state prior to being elected, and who retired from position(s)
other than that of elected official.
Finally,
a PERS retiree is exempt from reenrollment in the PERS in the following instances:
- A PERS retiree who accepts a PERS-covered
teaching position at a public institution of higher education (State college or
State university) is exempt from reenrolling in the PERS, no matter what the yearly
salary earned, for the duration of this employment. A
PERS retiree who accepts a position with the Department of Education of the State
of New Jersey in a position determined to be of critical need by the Commissioner
of Education is also exempt from reerollment, regardless of salary or duration
of appointment.
- A PERS retiree who
accepts a position with a board of education in a position determined to be of
critical need by the superintendent of the district is exempt from reenrollment.
Such employment taken with a board of education must be on a contractual basis
for a period of not more than one year. Upon written request to the PERS Board
of Trustees, this contract may be extended for an additional year, but cannot
in any case exceed two years with any individual board of education.
Members
of any of the State-administered retirement systems in New Jersey who have substantially
complied with the requirements necessary to effect a retirement benefit other
than a Deferred Retirement, and who become employed again in positions which make
them eligible to be members of another retirement system, are not eligible for
enrollment in that other system if the subsequent employment was begun on or after
the actual retirement date from the first system.
In
other words, if a member files for retirement, terminates employment prior to
retirement, and starts a new job in a position covered by a different retirement
system after the retirement date, the member would not be enrolled in the second
retirement system.
Consequences
for PERS Retirees
If
a member accepts regular full-time employment in a position that is eligible for PERS enrollment, and the total aggregate compensation (total annual earnings) from all
PERS positions in which the member is employed is greater than $15,000 per year,
the member must reenroll in the PERS as a condition of employment.
The retirement allowance will be canceled for the duration of employment
and the employee becomes an active contributing member again. (If over the age
of 60, the member must prove insurability to qualify for the group life insurance
coverage.)
If the
employee dies while enrolled in the second membership, no benefits from the previous
membership or retirement are payable, other than the return of any contributions,
plus interest, not already used to pay a retirement allowance.
This includes optional
settlements and death benefits.If
the member returns to employment under the PERS and is eligible for membership
but fails to be enrolled, the member would be required to reimburse the retirement
system in the amount of all retirement benefits received since the date enrollment
should have occurred. In addition, the employee would be required to pay pension
contributions in the form of back deductions back to the enrollment date.
You,
as the employer, may also be liable for pension and Social Security contributions.
There is no limitation on the amount of reimbursement that may be recovered by
the retirement system in these situations.
Retiring
from a Second Membership
When
a PERS member retires again, a new retirement application must be filed, so that
the first allowance may be restored. A second allowance will be calculated based
on the second membership. Each allowance will be paid in a different retirement check.
The first and second accounts cannot be combined to qualify for a Veteran Retirement.
Service credit from the first and second account may be combined to qualify for
enhanced benefits, i.e. 25 years, etc.
You, as the employer should be able to
tell members whether any employment they are considering is covered under the
PERS, but if questions remain, please contact the Division of Pensions and Benefits.
Returning
to Work in a Position Covered by Another New Jersey State-administered Retirement
System In
this case the member's retirement allowance continues, and the member can receive
salary, but the member cannot become a member of that system.
Disability
Retirees Restored to Active Service in the PERS
Before a disability retiree can return
to active service in a PERS-eligible title, the following procedures must be followed.
The member must: - Make
a request to the Division of Pensions and Benefits in writing of the desire to
return to employment. Submit a physician's
report to the Division certifying that he or she is no longer disabled and can
return to employment. The physician should be one with the same specialty as the
physician who originally certified that the member was disabled.Be
examined by a physician appointed by the PERS Board of Trustees.
- Be
approved for return to active service by the PERS Board of Trustees.
When
a disability retiree returns to active service and earns an annual salary that is more that the minimum salary for the original membership tier, an enrollment application must be submitted to the Division. In this
case, the original membership resumes, and the balance of contributions in the
account is prorated according to the retirement benefit already paid.
Teachers'
Pension and Annuity Fund (TPAF)
IRS Provisions
A TPAF retiree who returns to public employment
before age 59½ may be subject to 10 percent additional
federal tax withholding for an in service distribution
under the Internal Revenue Code. Because
this issue is fact sensitive, you should consult with
the Internal Revenue Service or a qualified tax consultant
and are strongly advised to use caution if
considering a return from retirement to public
employment.
Bona Fide Retirement
In applying the return to employment provisions
described throughout this section, it is assumed that
the TPAF retirement is considered to be “bona fide.”
This means the retiree has made a good faith
action to retire and that the employer/employee
relationship is completely severed.
A “bona fide” retirement must also be “due and
payable.” A TPAF member's retirement does not become “due and
payable” until there has been a cessation of employment
of at least 30 days following his or her retirement
date, or 30 days following approval of his or her retirement
by the TPAF Board of Trustees, whichever is later.
If
a retired member returns to a TPAF covered position — on either a
paid or voluntary basis — before the 30 days have
elapsed, he or she should expect to continue enrollment in
the TPAF. The retirement will be considered invalid,
and her or she will remain an active employee under your
original TPAF account.
Note: N.J.A.C. 17:3-21 requires that employees who
work a 10-month school year and retire on July 1 or
August 1, must count the 30-day break in service
from the start of the following normal school year in
September.
Other situations where a retirement may not be considered
“bona fide” include, but are not limited to, the
following examples:
• If a TPAF member makes arrangements prior to his or her retirement
to return to the same or similar public
employment as a regular employee, contract
employee, leased employee, or an independent
contractor, the employer/employee relationship
has not been completely severed —
regardless of the length of any break in
employment — and the retirement will be
determined to be invalid. In this case the member
would be required to remain an active employee
under the retirement system in the new
position.
• If the retired member is re-employed or appointed by the
same employer to the same or a similar position
that would have qualified for continued
membership in the retirement system had the
retirement not occurred, this may indicate that
the employer/employee relationship has not
been completely severed and, therefore, the
retirement may be determined to be invalid.
In
this case the member would be required to remain an
active employee under the retirement system
in the new position.
If the retirement is determined to be invalid (not
“bona fide”), the member will be required to reimburse the
retirement system for the amount of any retirement
benefits received from the date of retirement and be required to pay pension contributions in the form
of back deductions going back to the date when that member
should have been reenrolled.
There is no limitation on the amount of reimbursement
that may be recovered by the retirement
system in these situations.
Note: The information contained below assumes that the returning retiree has a “bona fide” retirement. If it is established at any time that the retirement was not made in good faith or that the employer-employee relationship was not completely severed, the provisions described below will not apply.
Effect
of Post-retirement Employment on TPAF Retirees
(Also see
Fact Sheet #28)
Working
for private industry, the federal government or a government agency in another
state will not normally affect a member's TPAF retirement benefits. (See the
"Disability Retiree" section below for exceptions to this rule.)
Returning to public employment
in New Jersey after retirement could affect retiree benefits.
Returning
to Work in a Position Covered by the TPAF
A
TPAF retiree who accepts regular full-time employment in a
position covered by TPAF must reenroll in the pension fund (see
below).
There are significant consequences to reenrollment, as discussed below.
Mandatory
Reenrollment
Membership
in TPAF is required as a condition of employment if:
- The employee is appointed to a permanent
teaching or professional staff position requiring certification and is employed
on a regular basis (including per diem and hourly positions) in a position covered
by Social Security, and the employee will work at least the minimum number of hours per week required for enrollment (32 hours for State education or local education employees);
-
A TPAF retiree is employed or accepts employment in a TPAF-eligible position as
an interim employee and will work at least the minimum number of hours per week required for enrollment (32 hours for State education or local education employees) except for those who fall
under the reenrollment exemption for certificated administrators and superintendentsregardless
of the length of service with an employer. *
*Prior
to November 3, 2003, local school boards were permitted to appoint a retired Teachers'
Pension and Annuity Fund (TPAF) member to any TPAF-covered position on an interim
basisfor up to six monthswithout affecting the individual's retirement
allowance, under the rule N.J.A.C. 17:3-2.6. On October 2, 2003, the Teachers'
Pension and Annuity Fund Board of Trustees repealed this ruleexcept for
the reenrollment exemptions explained below. You,
as the employer, should be able to tell if the employment the member is considering
is covered by the TPAF.
Finally,
a TPAF retiree is exempt from reenrollment in the TPAF in two instances:
-
A TPAF retiree
who is a certificated administrator or a certificated superintendent may accept
a certificated position with the Department of Education of the State of New Jersey
without reenrollment, as long as the position is determined to be of critical
need by the Commissioner of Education. There are no earnings or duration limits
upon such appointments. -
A
TPAF retiree who is a certificated administrator or a certificated superintendent
who accepts a certificated administrator position or a certificated superintendent
position (respectively) with a board of education in a position determined to
be of critical need by the superintendent of the district, is exempt from reenrollment.
Such employment taken with a board of education must be on a contractual basis
for a period of not more than one year. Upon written request to the TPAF Board
of Trustees, this contract may be extended for an additional year, but cannot
in any case exceed two years with any individual board of education.
If
a member collecting retirement benefits from the TPAF, other than a disability
retirement, accepts employment in a position covered by the TPAF, the following
steps should occur:You,
as the employer, must submit a TPAF
Enrollment Application on the member's behalf to the Division of Pensions
and Benefits, in a timely manner.
Mentoring
and Reenrollment in the TPAF
Recent
changes in the state licensing regulations allowed districts to use retired teachers
and administrators to serve as mentors for new teachers. As an employer, you need
to be aware that such employment could violate the earnings threshold established
in statute for the TPAF. Such violations could jeopardize either a retired TPAF
member's earnings or benefits and result in a requirement to repay the state for
any pension payments made during the employment period.
As
explained previously, a retired TPAF member appointed by the State, local board
of education, or charter school to a position listed in the definition of "teacher"
found in N.J.S.A. 18A:66-2(p), or as a regular full-time or part-time employee
in position that meets the following conditions, shall be required to become a
member of the TPAF effective as of the date of his/her employment
The
position requires a valid certificate issued by the State Board of Education and
the person employed holds this valid certificate;
-
The
position is covered by Social Security, and;
The
salary for the position is $500 or more within a year.
The
stipend for mentoring is $550 for traditional route provisional teacher mentors
and $1,000 for alternate route provisional teacher mentors. All retired mentor
teachers making more that $499 would be required to reenroll in the TPAF as outlined
in statute.
Please
contact the Office of Academic and Professional Standards,
at (609) 984-6377 with questions regarding the mentoring pension issues. For all
other questions involving the use of retired teachers and administrators in schools,
please contact:
Legislative/Legal
Affairs Unit
Division of Pensions and Benefits
Department of the Treasury
P.O.
Box 295
Trenton, NJ 08625-0295 |
BACK
TO TOP Consequences
of Reenrollment
The
employee's application will be referred to the Board of Trustees of the retirement
system to cancel the member's retirement allowance as of the required date of
enrollment in TPAF. The date of enrollment is not negotiable. The TPAF Board Secretary
will advise the employee of the action taken by the Board.
Once
the Board of Trustees cancels the member's retirement allowance, the TPAF Enrollment
Application will be processed and a certification to deduct pension contributions
will be sent to you.The
member will be billed for any retirement payments received after the effective
date of their new TPAF enrollment.
Because
of the sequence of events, most retirees are enrolled in the TPAF on a retroactive
basis. They should therefore anticipate that they would be required to refund
one or more pension checks to the retirement system.
In addition, back deductions for member contributions owed may be necessary.
Retiring
for the Second Time
The
member must file an application for retirement when the time comes to retire for
the second time. The former retirement allowance and any option selection will
be restored along with any appropriate cost-of-living adjustment payable based
upon the original date of retirement.
In addition, the member will receive a retirement
allowance based upon the new period of service. Service credit from both retirements
may be combined to satisfy the 25 years of service requirement for TPAF-paid State
Health Benefits Program coverage. (Note: Any additional allowance due as a result
of the second period of service will be determined under the Service Retirement
formula; a reduction applies if the retiree is under age 55.)
By law, the combined
retirement allowances cannot be greater than the allowance that would have been
received if the first retirement had not occurred.
Returning
To Work in A Position Covered by Another New Jersey State-administered Retirement
System
In this
case, the member's retirement allowance continues and salary can be earned, but the
member cannot enroll in that system.
Disability
Retirees Restored to Active Service
Before a disability retiree can return
to active service in a TPAF-eligible title, the following procedures must be followed.
The disability retiree must: - Make
a request to the Division of Pensions and Benefits in writing. Submit
a physician's report to the Division certifying that he or she is no longer disabled
and can return to employment. The physician should be one with the same specialty
as the physician who originally certified that the members was disabled.Be
examined by a physician appointed by the TPAF Board of Trustees.
- Be
approved for return to active service by the TPAF Board of Trustees.
When
a disability retiree returns to active service and earns an annual salary that exceeds the salary required for the member's original membership tier, an enrollment application must be submitted to the Division. In this
case, the original membership resumes and the balance of contributions in the
account is prorated by the retirement benefit already paid. BACK
TO TOP
Police
and Firemen's Retirement System (PFRS)
IRS Provisions
A PFRS retiree who returns to public employment before age 59½ may be subject to 10 percent additional federal tax withholding for an in service distribution under the Internal Revenue Code. Because this issue is fact sensitive, members should consult with the Internal Revenue Service or a qualified tax consultant and are strongly advised to use caution if considering a return from retirement to public
employment.
Bona Fide Retirement
In applying the return to employment provisions described throughout this section, it is assumed that the PFRS retirement is considered to be “bona fide.” This means the retiree has made a good faith action to retire and that the employer/employee relationship is completely severed.
A “bona fide” retirement must also be “due and payable.” A member's retirement does not become “due and payable” until there has been a cessation of employment of at least 30 days following his or her retirement date, or 30 days following approval of his or her retirement by the PFRS Board of Trustees, whichever is later.
If the member returns to a PFRS covered position — on either a paid or voluntary basis — before the 30 days have elapsed, the member should expect to continue enrollment in the PFRS. The retirement will be considered invalid, and the member will remain an active employee under his or her original PFRS account.
Other situations where a retirement may not be considered “bona fide” include, but are not limited to, the following examples:
- If the member make arrangements prior to retirement to return to the same or similar public employment as a regular employee, contract employee, leased employee, or an independent contractor, the employer-employee relationship has not been completely severed — regardless of the length of any break in employment — and his or her retirement will be determined to be invalid. In this case the member is required to remain an active employee under the retirement system in the new position.
- If the member is re-employed or appointed by the same employer to the same or a similar position that would have qualified for continued membership in the retirement system had the retirement not occurred, this may indicate that the employer/employee relationship has not been completely severed and, therefore, the member's retirement may be determined to be invalid. In this case the member is required to remain an
active employee under the retirement system in the new position.
- If a member's retirement is determined to be invalid (not “bona fide”), you will be required to reimburse the retirement system for the amount of any retirement benefits you receive from the date of retirement and be required to pay pension contributions in the form of back deductions going back to the date when you should have been reenrolled. There is no limitation
on the amount of reimbursement that may be recovered by the retirement system in these situations.
Note: The information contained below assumes that the returning retiree has a "bona fide" retirement. If it is established at any time that the retirement was not made in good faith or that the employer/employee relationship was not completely severed, the provisions described below will not apply.
Effect
of Post-retirement Employment on Retirement
(Also see
Fact Sheet #29)
With
the exception of those retiring under a disability retirement, there are no restrictions
concerning employment after retirement from the PFRS if the retiree takes employment
in private industry, the federal government, or public employment in a state other
than New Jersey.
As noted above, the information contained below assumes that the returning retiree has a “bone fide” retirement.
Returning
to Work in a Position Covered by the PFRS
If
a member returns to employment in a permanent position covered by the PFRS, the
individual must cancel his or her retirement and reenroll in the PFRS.
Mandatory
Reenrollment in the PFRS
All
eligibility requirements must be met except the age requirement. The member
becomes an active, contributing member again.
Consequences
for PFRS Retirees
If
the member dies while in the second membership, no benefits from the previous
membership or retirement are payable.
Retiring
from a Second Membership
When
members retire from their second position, they must file a retirement application
so that their first retirement allowance will be restored and a second allowance
from the second membership will be calculated. Each retirement allowance will be paid in a separate retirement
check.
By law, the combined retirement allowances cannot be greater than the allowance
that would have been received if the first retirement had not occurred.
BACK
TO TOP
Returning
to Work in a Position Covered by a Different New Jersey State-administered Retirement
System
In this
case, the member's retirement allowance continues intact and the retiree can receive
salary but cannot become a member of that retirement system.
A
Cautionary Note: PFRS Retirees Returning to Work Supervising Police or
Fire Personnel within Six Months of Retirement
A
PFRS retiree who is appointed to a position with a law enforcement or firefighting
unit, with administrative or supervisory duties over police officers and/or firefighters,
must reenroll in the PFRS if this appointment occurs less than six months after
retirementeven when the PFRS retiree is assuming a title not normally
covered by the PFRS.
This is in accordance with New Jersey statutes (N.J.S.A.
43:16A-3.1); it includes service in appointed, administrative or supervisory positions
such as Police Director, Fire Director, Director of Public Safety, and others,
where duties are similar or substantially the same as those under a PFRS-covered
title. A PFRS retiree appointed
to such a position with a law enforcement or firefighting unit within 30 days
of retirement would not be eligible to collect any retirement benefits, because
the retirement would not have been valid; enrollment in the PFRS would continue.
A PFRS member must have at least a 30-day break in service after his/her retirement
date to be considered retired from the PFRS.
A PFRS retiree taking such a position six months or more after his retirement would not be required to reenroll in the PFRS. Care
should be taken when hiring a PFRS retiree to a PFRS-covered position, especially
when cancellation of the retirement allowance and reenrollment will be required.
Disability
Retirees Returning to Work
Before
a disability retiree can return to active service in a PFRS-eligible title, the
following procedures must be followed. The disability retiree must:
- Make a request to the Division of Pensions
and Benefits in writing. Submit a physician's report to the Division certifying
that he or she is no longer disabled and can return to employment. The physician
should have the same specialty as the physician who originally certified that
he or she was disabled.Be examined by a physician appointed by the PFRS
Board of Trustees.
- Be approved for return to active service by the PFRS
Board of Trustees.
When a disability retiree
returns to active PFRS service, an enrollment application must be submitted to
the Division. In this case, the original membership resumes and the balance of
contributions in the account is prorated by the retirement benefit already paid.
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