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Retiree Reemployment Changes

Kacie Kefgen

By Kacie Kefgen, MASB Assistant Director of Labor Relations and Legal Services

DashBoard, Jan. 13, 2016

Last month, House Bill 4059 became law, changing school retiree employment rules (again). If a retiree works in a critical shortage area or as a substitute teacher, instructional coach, school improvement facilitator or at a university, HB 4059 may affect the situation. Below you will find a summary of the changes made by the new legislation.

Please note that the Office of Retirement Services is working to update its guidance materials to reflect these changes, but as of Jan. 11, 2016, that guidance has not been updated. Furthermore, the legislature’s website has not yet updated MCL 38.1361 to reflect the changes. Those seeking additional information in the meantime can refer to the version approved by the House and Senate. Also, because these rules are complex and the potential impact on a retiree so large, MASB recommends that both the district and the retiree consult legal counsel before making a final decision on reemployment.

General Rule: If a retiree works directly for a reporting unit (school district) and earns more than one-third of their final average compensation, that retiree would forfeit their retirement allowance and their health care subsidy for each month they are employed, unless their situation meets one of the following exceptions (MCL 38.1361(7)):

  • Critical Shortage Area Employment (MCL 38.1361(5))
    • Retiree is employed by a reporting unit in a critical shortage area
    • Retiree has been retired for at least 12 months
    • Employment does not exceed three years
    • Employment does not count toward recomputation of retirement allowance
    • Reporting unit pays 100% of the contribution rates for the unfunded actuarial accrued liability
  • Substitute Teaching (MCL 38.1361(9))
    • Retiree retired between June 30, 2010 and Sept. 1, 2015
    • Retiree is employed by a reporting unit, a third party or as an independent contractor
    • There was a bona fide termination of retiree
    • No work during month of retirement effective date
    • Earnings do not exceed one-third of FAC
    • Employment does not count toward recomputation of retirement allowance
    • Reporting unit pays 100% of the contribution rates for the UAAL
    • Reporting unit must report information to retirement system
  • Instructional Coach or School Improvement Facilitator (MCL 38.1361(10))
    • Retiree retired between June 30, 2010 and Sept. 1, 2015
    • Retiree is employed by a reporting unit, a third party or as an independent contractor
    • There was a bona fide termination of retiree
    • No work during month of retirement effective date
    • Earnings do not exceed one-third of FAC
    • Employment does not count toward recomputation of retirement allowance
    • Reporting unit pays 100% of the contribution rates for the UAAL
    • Reporting unit must report information to retirement system
  • University Employment (MCL 38.1361(11))
    • Retiree retired between June 30,2010 and Oct. 1, 2014
    • Retiree is former teacher or administrator employed in teaching, research or in a “program-department direction” capacity by a reporting unit university
    • There was a bona fide termination of retiree
    • No work during month of retirement effective date
    • Employment does not count toward recomputation of retirement allowance
    • Reporting unit pays 100% of the contribution rates for the UAAL
    • University must report employment to retirement system
  • University Employment (MCL 38.1361(3))
    • Retiree is former teacher or administrator employed in a teaching or research capacity by a reporting unit university
    • Employment does not count toward recomputation of retirement allowance
    • University must report employment to retirement system

Core Services: If a retiree retires after June 30,2010 and works for a third party or as an independent contractor to perform core services, as defined by ORS, the retiree forfeits their retirement allowance and their health care subsidy for each month they are employed (MCL 38.1361(8)) unless they meet the requirements under the substitute teaching, instructional coach/school improvement or critical shortage exceptions listed above.

Reporting Unit Contribution Rates (MCL 38.1361(12)): Until July 1, 2018, if a retiree’s situation reflects all of the following, the reporting unit must pay 100% of the contribution rate for the UAAL for the retiree health care and pension to the retirement system:

  • Retiree retires after June 30, 2010
  • Employed by a third party or as an independent contractor in critical shortage area
  • Retired for at least 12 months before reemployment
  • Employment does not exceed three years

If you have any questions about this or other legal issues, please contact the MASB Legal Team at laborrelations@masb.org or 517.327.5900.

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