Retirees Return to Work, Face Earning Limits from New Law

By Leo Welch

Illinois as a state has generated a pension obligation debt of over 100 billion dollars. This deficit is primarily due to the General Assembly failing to pay the state's share of the pension funding obligation. Now legislators are pushing for "pension reform" with considerable help from anti-public sector pension organizations. One of these bills was Senate Bill 1687, "Retun-to-Work," sponsored by Daniel Biss, a Democrat from Evanston. The bill was passed by the House and Senate and has been signed by the Governor. It now exists as Illinois Compiled Statute 5115-139. The implementation of the bill took public colleges and Universities by surprise since it took effect to on August 1, 2013, a very short time prior to the start of the Fall Semester. It also required the State University Retirement System (SURS) to provide guidelines to colleges and universities as to how to determine eligibility for those that were returning to work after retiring.

The information provided by SURS is as follows:

General Information

Under the SURS return-to-work restrictions, an annuitant may not return to work with a SURS-covered employer until retired for at least 60 calendar days. If the annuitant does not satisfy this requirement, the annuity will be cancelled.

It is the annuitant's responsibility to notify SURS upon returning to employment for a SURS-covered employer.

If the annuitant returns to SURS-covered employment after the 60-day period the annuitant will be subject to an earnings limitation. The exact amount of the earnings limitation will be stated on the Certification of Retirement Annuity upon finalization of the retirement claim. If the annuitant exceeds the earnings limitation, the retirement annuity will be reduced or suspended.

If an annuitant chooses to resume active participation in SURS and forego the annuity payments, special limitations may apply. Please contact SURS for more information. There is no limitation on the post-retirement earnings if an annuitant returns to work with an employer who is not covered by SURS.

If the annuitant's first participation began on or after January 1, 2011 (Tier II), and the annuitant begins full-time employment with an eligible retirement system covered under the Illinois Retirement Systems Reciprocal Act, SURS may be required to suspend the annuity during that employment.

Annuitants under the Self-Managed Plan (SMP) are not subject to any post-retirement limitations.

Earnings Limitation

If an annuitant receives any compensation from a SURS-covered employer, it will be subject to the earnings limitation.

The only exception to the above would be if an annuitant is an independent contractor as determined by the IRS. Independent contractors must file a form SS-8 (Determination of Employee Work Status for Purposes of Employment Taxes and Income Tax Withholding) with the IRS. Once the IRS makes the determination of independent contractor status, the annuitant must provide SURS a copy of the IRS determination letter.

Retirement before age 60:

If the annuity payments began before age 60, the base monthly earnings from a SURS-covered employer cannot exceed the current monthly base annuity. This limitation continues to apply after the annuitant turns 60.

Retirement at age 60 or later:

If the annuity payment began at age 60 or later, the earnings from a SURS-covered employer during any academic year after the retirement date, combined with the annual base annuity from SURS, may not exceed the annuitant's highest earnings during any academic year before the retirement.

Once the annual earnings limitation is calculated, it does not change.

Example:

If the highest academic year earnings during the annuitant's career were $50,000 and the annual base annuity is $24,000 ($2,000/mo. x 12 months), the annual earnings limitation would be $26,000 ($50,000-$24,000).