When Rehiring Retired Public Workers, Guidelines Can Be Key

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New research takes a look at post-retirement employment policies in states across the U.S.

Hiring employees who are returning to the workforce after retirement can be a helpful option for state and local government employers with tough-to-fill job openings.

But across the U.S. the practice is subject to a wide range of restrictions meant to prevent problematic practices that can arise when retirees draw public pension benefits while also earning taxpayer-funded salaries—which is sometimes characterized as “double dipping.”

The Center for State and Local Government Excellence and the National Association of State Retirement Administrators released a report this week that they say offers the first comprehensive analysis of post-retirement employment policies for 83 state pension plans.

“Prior to this report, not much was known about the different ways state pension systems handle the important topic of post-retirement employment of state and local workers,” Joshua Franzel, a co-author of the report and SLGE’s president and CEO said in a statement.

Accompanying the release is a dataset that allows for policy comparisons across state plans.

The report says that as the public sector workforce ages, an increasing number of older workers are getting close to retirement, and state and local government employers face the possibility of a shortage of skilled and seasoned workers in some fields.

Policing, engineering and information technology jobs, are among those that can be hardest to hire for.

The findings note that people can come back from retirement for a variety of reasons, but that for 82 percent of those who return to work it’s anticipated, not the result of financial pressure.

“It is worthwhile for employers to consider policies that promote the continued work or return to work of older employees, who often have the institutional knowledge, skills, experience, and interest to continue partaking in meaningful work,” the researchers say.

Their report explains that restrictions imposed under post-retirement employment policies are generally designed to balance two key goals. One is protecting the integrity of pension plans. The other is giving employers the leeway to hire the qualified employees that they need.

If retirees are allowed to quickly return to a job similar to the one they retired from, while also having their pension benefits kick in, it can create incentives for them to retire as soon as they can.

This can pose risks and higher costs for pension plans by requiring longer benefit payouts to people who continue working.

“At the same time, often the sole or primary qualified candidate available to fill certain public positions is a retired public employee. In addition, many retirees want, for one or more of many reasons, to return to work,” the report says.

In an effort to strike a balance between these concerns, states put guardrails in place for people seeking to come back to work while also receiving retirement benefits.

Some of the restrictions in place on post-retirement employment include “break in service” rules, which establish how long someone must be retired before they can return to work.

The rules vary between states. For instance, for some North Carolina local government retirees it can be one-month. Whereas the Florida Retirement System has a year-long threshold.

States may also impose restrictions on rehired retirees when it comes to the number of days or hours they can work, or the maximum amount of time that they can hold a position, in order for them to continue receiving retirement benefits while reemployed.

There are other policies that the report highlights as well. It also includes state case studies.

A full copy of the research can be found here. And there’s a webinar planned to discuss the findings on Dec. 12.

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

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