Last Updated: May 2008
This publication describes the possible impacts on your retirement benefit if you return to work for an employer covered by one of the Washington state retirement systems. You can return to work for an employer not covered by a Washington state retirement system without impacting your retirement benefit, unless you are a disability retiree.
It is important to understand when you become a retiree because you must first retire before you can be covered under the return to work laws. You become a retiree when you:
Taking these actions will establish your effective retirement date – the first day of the month following the month in which you meet the conditions for retirement.
You must wait at least 30 calendar days after your effective retirement date before returning to work. If you return to work for a DRS-covered employer less than 30 days after your effective retirement date, your benefit will be reduced by 5.5 percent for every eight hours worked in a month up to a maximum of 160 hours. If the reduction is more than your benefit, the excess is taken from the next month’s benefit payment. The reduction continues until you stop working for a full 30 days.
If you terminate employment and file a retirement application but return to work before your effective retirement date, your application for retirement will be canceled. Because you are not considered retired, you will return to active membership and be required to pay member contributions.
When you return to work for a DRS-covered employer, it is important to let your employer know you are a retiree. If you are hired into a position that is eligible for DRS membership, your employer is required to report your hours of employment each month to DRS. If you are hired into a position that is ineligible for PERS membership, your employer is required to report that you have returned to work but does not need to report your hours. If your employer does not know you are retired, you may be reported as an active member – which may stop your benefit. Contact your employer to determine the eligibility of your position.
If you return to work in a PERS-eligible position, there are limits placed on your employment. These limits vary depending on when you retired and how many days you wait before returning to work.
If you return to work in a position that is ineligible for DRS membership, the rules above do not apply. You can work in this position as long as it is classified as ineligible and still receive your full retirement benefit.
| If you retire | and wait | you can work |
|---|---|---|
| Before 8/1/2003 | at least one calendar month | up to 1,500 hours* per calendar year |
| On or after 8/1/2003 | at least 30 calendar days | up to 867 hours per calendar year |
| at least 90 calendar days | up to 1,500 hours* per calendar year if your employer meets the specified hiring requirements |
* Provided you have not yet met the cumulative limit. (See below.)
You can work as many hours as you wish in a calendar year. However, if you work over the maximum number of hours allowed, your retirement benefit will be suspended for the remainder of the calendar year or until you terminate employment. In the month you exceed the limit, your benefit will be prorated. Your benefit will be restarted in January of the following year and your hours will be reset automatically.
All hours for which you receive compensation count toward the limit. This includes paid holidays or compensatory time, sick leave or annual leave taken in lieu of normal work hours. Sick leave or annual leave that is cashed out at the end of an employment period does not count toward the limit. Cashed out compensatory time does count toward the limit.
If you are eligible to work up to 1,500 hours in a calendar year, there is a cumulative lifetime limit on the hours you can work while still receiving a benefit. This cumulative limit is 1,900 hours but only the hours worked in excess of 867 hours in a calendar year count toward it. Here’s how it works:
If you are only eligible to work up to 867 hours in a calendar year, there is no cumulative limit placed on your employment. You can continue to work up to 867 hours each calendar year for as long as you like. If you work beyond 867 hours, your benefit will be suspended. See examples on below.
Becky retires effective January 1, 2002, and returns to work February 1, 2002. She works full-time for the next three years as shown in the chart below. It will take her just over three years to reach the 1,900 hour limit.
| Year | Hours worked | Benefit suspended at | Hours applied to limit | Hours remaining |
|---|---|---|---|---|
| 2002 | 1,980 | 1,500 hrs | 633 | 1,267 |
| 2003 | 2,040 | 1,500 hrs | 633 | 634 |
| 2004 | 2,040 | 1,500 hrs | 633 | 1 |
Gerald retires effective January 1, 2004, and returns to work May 1, 2004. He works part-time for the next three years as shown in the chart below. It will take him several years to reach the 1,900 hour limit.
| Year | Hours worked | Benefit suspended at | Hours applied to limit | Hours remaining |
|---|---|---|---|---|
| 2005 | 1,020 | N/A | 153 | 1,747 |
| 2006 | 790 | N/A | 0 | 1,747 |
| 2007 | 1,150 | N/A | 283 | 1,464 |
DRS keeps track of the hours you accumulate toward the 1,900 hour limit. In March of each year, you will receive a letter from DRS showing the total number of hours reported by your employer(s) for the previous year, the number of hours counted toward the cumulative limit, and the number of hours remaining before you reach the limit. If you did not have any hours applied toward the cumulative limit in the previous year, you will not receive this letter.
Once you reach the cumulative limit for hours of post-retirement employment, your retirement benefit will be suspended for the remainder of the calendar year or until you terminate employment. In the month you exceed the limit, your benefit will be prorated. In subsequent calendar years, you will only be allowed to work up to 867 hours before your benefit is suspended.
If you are a disability retiree, your benefit could be affected by returning to any kind of employment. Your return to work could mean that you are no longer disabled and therefore no longer eligible to receive a disability retirement. If you retired for disability and are considering returning to work, please contact DRS.
Under Washington State law, there are no limits on the amount of income you can earn. However, if you are receiving a Social Security benefit, returning to work may impact your Social Security income. To check annual income limitations under Social Security law, refer to the publication called, What You Need to Know When You Get Retirement or Survivors Benefits, or visit the Social Security Web site.
If you are hired into a PERS-eligible position, you can return to active membership. However, when you do so your benefit will stop. When you again retire, a new benefit will be calculated to reflect the additional service credit earned. If you have completed two or more years of uninterrupted service after going back to work, you may select a new benefit option.
If you return to active membership in another DRS-covered plan, contact DRS to find out which plan's rules apply. Returning to work in another DRS-covered plan may cause your benefit to be suspended.
A dual member retiree is someone who has used service credit earned in more than one retirement system to qualify for retirement. If you retired as a dual member and are considering returning to work, please contact DRS to determine the possible impacts on your benefit.
Overpayments and Underpayments: If you receive an overpayment of your retirement benefit, you will be required to repay the amount of the overpayment to DRS. If you receive an underpayment, DRS will correct the error and pay you the amount owed.
Deferred Compensation: If you are receiving payment from the Deferred Compensation Program (DCP), your payments will not be affected by your return to work. If you are not yet receiving payment and return to work, you can continue making contributions to the plan up to an annual maximum contribution amount depending on your income. If you have questions, please contact DCP.
Health Care: If you retired from state government, a public education institution or a local government employer participating in the Public Employees Benefits Board (PEBB), you may have the option to return to PEBB-sponsored coverage when you return to full retirement status. If you have questions about your health care coverage, please contact the Health Care Authority. If you retired from a local government employer, you will have to coordinate with your employer and health care provider to determine what you can do.
If you have questions about returning to work after retirement that are not covered in this publication, please contact DRS. Be prepared to provide your name, Social Security Number, and retirement system and plan.