Episode 58 – Returning to work after retirement
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. Now, for a lot of people, retirement is a time to kind of sit back and enjoy, maybe sit on a beach or do some gardening or maybe some volunteering. But some people may even decide that they want to go back to work after they retire.
And as a retiree, you can go back to work for a DRS employer and still receive your pension, but there’s a couple of rules here. So, we’ve invited our guest Kumano to the podcast to kind of talk about some of these details. Welcome Kumano!
Kumano
Thank you, Jenny. Pleasure to be here. Look forward to talking about post-retirement activity.
Jenny
Yeah.
Seth
Kumano, a return guest as well, talking to us about divorce earlier. So, I appreciate you coming back Kumano.
Kumano
Yeah, yeah. Pleasure.
Seth
So Kumano, I think maybe the first place to start is before these rules come into effect. That you actually have to retire. And I know Jenny and I just recorded an episode about the difference between separating from an employment and retirement. But could you just from your perspective, remind folks about what the difference is between separating from employment and retiring and why you have to do one before the other?
Kumano
Yeah, and it’s a really good way of looking at it, sort of like stages to the goal. And so the first stage in regard going to post retirement work or working as a retiree would be you need to separate all DRS employment before you go into that sort of post-retirement retiree return to work stage. And separation means that you’re no longer actively working for that employer.
You’re no longer on their payroll. You’ve turned in all of your access, whether that be computers or keys, and you are no longer being reported to the Department of Retirement. That would be what we consider as total separation from service. And then as you go into retirement, you are now becoming essentially an employee to the retirement plan.
You’re going to get paid by them. And a retiree is someone who gets a distribution from that retirement plan. And in order to get that, you need to be separated from all employment with the DRS employer.
Seth
And so then let’s assume a person is retired. They’ve started collecting their pension payments from DRS and as Jenny mentioned, they might decide, hey, I want to go back to work in some fashion. And that could be for the employer that you previously worked for. Or it could be you’ve moved across the state, you’ve moved from eastern Washington to western Washington or vice versa, and you find a new employer that you’re interested in working for.
What sort of things should a retiree think about when they’re thinking about returning to some form of public employment?
Kumano
Good question. So that’s sort of, again, a part of the stage of going to a retiree as you separate from service. And so, an important part of just becoming a retiree is separating out employment. So, you’re eligible to collect a pension now to be sort of eligible to start working as a retiree with our employers after you’re collecting hopefully your first pension and you’ve had your break, like Jenny said.
And what we would like to see is a 30-day break. And that means that once you’ve retired and let’s say for this example, you retired on July 1st of 2024, what we would like to see is a 30-day break, 30 calendar days, break from all employment. And that would happen right after your retirement date of July 1st.
So from July 1st, all the way through to the end of July, we would like to see you on vacation not being reported by any DRS employer. And so, once you’ve achieved that separation of 30 days, now you can start entertaining, options of employment as a retiree with any of our DRS employers.
Seth
Kumano know before we started recording, we said we weren’t going to get too far in the weeds. And now, almost immediately, I want to jump deep, deep into the weeds.
Kumano
Yes, it’s hard to not provide the detail. Yeah.
Seth
So, one thing that you mentioned there that I think we want to highlight is — you’ve taken this break from prior employment, you’ve retired, you started collecting your pension. But one of the key points that sometimes trips people up is that you can’t have any agreement to return to work before you retire, as well.
Kumano
Right. And that gets right back to the first stage we talked about, which is separating all employment with your employer. And so the employer retiring from let’s say, for example, you’re retiring from the Department of Corrections or something. Well, if you retire, we would expect that you would not have any written or verbal agreement to return to that same employer in either the same position or any other position working for them.
The Internal Revenue Service is clear that those agreements, aren’t allowed in regards to being eligible to retire. And so, it’s important that you don’t have those. Now, there are some rules about making sure you have separation from all DRS employment. So, I don’t know Seth, if you wanted to get into other employers.
Seth
I don’t think we need to go that deep. I do just want to make sure we highlight this idea that it has to be a true separation. Even when we were talking earlier and Jenny was mentioning, like, thinking about retirement is like going on vacation. And it can feel that way. And I can say, oh, I’m going to go on vacation for a month and then I’m going to come back to my employer.
In that case you haven’t actually separated it from employment because it’s just a vacation. It’s not actually a retirement. Does that make sense Jenny?
Jenny
That makes sense. Yeah, I guess I was thinking about it. If you retire and then you go take a vacation or take some time off. You know, then you can come back to work.
Seth
Yeah. And that’s totally fine. And exactly what we would expect. It’s the idea that you can’t have an agreement to return to work before you’ve actually retired. In that case, you haven’t actually separated from employment. And that first key step in the retirement process is actually separated employment.
Kumano
Yeah. And a lot of the activity that I do see that relates to what you’re talking about [which] is sometimes there’s a misunderstanding that all I have to do is quit my PERS job, and I can go start some other retirement system job.
Like, let’s say I retire working for the department of, you know, roads for some county and then I can just go be a law enforcement officer for the same county. Well, that would be in a prior agreement. And it also would not be allowed because you had not separated all employment from that employer. A lot of people think just separating the pension plan is what separation is, and it’s actually the employer.
Seth
Yeah. And so similar like going down to part time isn’t separating from your employer. You’re not able to start collecting your pension yet. You have to actually separate from your employer.
Kumano
Yeah. We want to see you have the party — the retirement party with the cake and all that stuff. Yeah.
Seth
So yeah, we went way down the weeds as we promised we wouldn’t. But that’s what happens when Kumano and I get together and that’s totally fine. I think what we really wanted to focus this conversation on is once the person’s retired, they’ve decided to go back to work, they start working for a public employer; what things do they need to keep in mind as far as our restrictions and being able to still collect their pension? Maybe Kumano, if you could give us an example of what that could look like for a person?
Kumano
Yes. Well, the first thing to know is, that if you’re under any hour limits, it would mean you’re in an eligible position, to be reported to DRS. And typically, for most retirees, there’s some exceptions, but most retirees in an eligible position will be limited to 867 hours in a calendar year. And so that would be the rules for most retirees.
Of course, there are some exceptions we could talk about, but in general, that is the rule for eligible positions. You can only work up to 867. Now, if you breach that limit and go over 867, your pension will be suspended and it will restart either when you separate that employer or the next January of the next year occurs, whichever is first.
Seth
So Kumano, walk us through an example. So you mentioned, you know, I retired from the Department of Corrections. I take a couple of months off and then I decide that I’m going to work part time for the local school district as a para educator, and it’s a position that would normally be eligible for the school employees retirement plan.
But I’m a retiree from PERS and I’m going to work, you know, almost full time. School year starts in September. Walk me forward from there.
Kumano
Yeah. So, if you start during the normal school year, which would be September and you’re a PERS retiree and like you said, it’s an eligible position reportable under the school employees, your hours would start accumulating. They would be reported to us from the school district.
And then as you get towards that limit, we would have some communication sent out to you saying, hey, you’re nearing the limit. And then, of course, there would be a letter saying when you reached the limit.
Now, for someone in a school employee’s position like that, you probably wouldn’t go over the limit because you’re talking September through December. So, chances are you would stay under the limit. There would be no impact your pension. And then the next January, your new hours would start of 867 for that calendar year. So, in that scenario, that would be a very good choice.
Now, as you get into the next school year and your full time, I mean, not next school year, but next year, you could reach the limit by around May if you’re working full time with the school. So, in that case, you would potentially see a letter from us saying that you’re nearing your limit or you’ve breached your limit. So, you would typically probably have a suspension of the pension at that point in June, let’s say, because you would have 867 hours to work with.
Jenny
Yeah, that makes a lot of sense.
Kumano
And that’s kind of how that scenario would play out with a school district. And it’s important to point out there that you’re going by calendar year, not the school district calendar, but calendar year for your hours.
Jenny
Yeah. But then, like you said, if you’re starting with that calendar year in January, if you’re working full time, you’d probably run out of those 867 hours by about May.
Kumano
That’s when we typically see the activity for going over the limit is probably mid to late May for full time.
Seth
It is totally possible for a person if they’re working part time, they’re never going to go over the limit. Yeah.
Kumano
Oh yeah. Yeah. In that scenario, obviously they would probably breach because they’d be going about 5 or 6 months full time. But yeah, part time. We see it all the time. Work working 67 hours a month. You would probably never breach the limit at all. And your pension would never be impacted.
Seth
One question I know we get oftentimes on this subject — and so I just want to reinforce it — we’re really just talking about returning to public employment in the state of Washington. So, if you move out of state, these rules aren’t really going to apply to you if you work in a private sector job working for Starbucks, also not going to apply to you.
You can work as much as you want in those scenarios. It’s really just if you’re working in a position that would normally be participating in one of the DRS retirement plans. Yeah, if you’re doing that, then there may be some additional restrictions that we want people to be aware of.
Kumano
Any federal employment, any out of state, other state employment, private employment, independent contractor employment. These are all outside of eligible employment with our pension plans.
Seth
And as Kumano mentioned earlier, there are exceptions to these rules and variations and different limits in different time periods and for different positions. And I think I heard someone say that these return to work rules like have changed every 18 months for the last 20 years or something like that. It’s frequent that they change. And so just because the rules were a way for somebody two years ago when they retired, it’s probably worth checking with DRS, making sure that you understand what your situation is, what situation you’re thinking about, going back to work in and how those rules apply.
And Kumano’s got a great team that can really dive deep into this. Our contact center answer calls about it as well. And we’ve got a lot of this information on our website as well. So Jenny, has this raised any additional questions for you, I know we’re both quite a ways away from retiring and returning, possibly returning to work in the future.
Jenny
I think it’s pretty straightforward. And it’s that 30 days and generally that’s enough time to be able to say, I’m going to kick my feet up for a month, and then you can think about going back to work. Yeah.
Kumano
Yeah. In the, retirement space. Currently, retirement for members looks a lot different than it did 20 years ago. And I think a lot of people are continuing to work for various reasons. But I think the most important thing in this podcast to understand about retiree return to work, that it is complicated. But if you have a process of approach to understanding it, and I always tell members, please plan your retiree return to work activity like you did your retirement: call DRS, ask questions, read online resources, go to seminars, listen to podcasts or videos.
Get educated first and I think that’ll put you on the right path to the decisions you want to make. And then of course, understanding you need to separate and take that 30 days so you can keep that pension started.
Jenny
Right. I think that’s great.
Seth
Thanks for joining us Kumano.
Kumano
All right guys. Pleasure.
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Disclaimer
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