DRSN e08-014, Early Retirement Factors and Retirees
- Notice No.: 08-014
- Date: August 7, 2008
- Applies to: All Employers
- Subject: Early Retirement Factors and Retirees
2008 Early Reduction Factors & Retirees Who Return To Work
Engrossed House Bill 2391, passed in 2007, creating new Early Retirement Factors (ERF) and new Retiree Return To Work rules for members that choose to retire under the 2008 ERF. This ERF is available to Plan 2 and 3 members of the following systems: Public Employees’ Retirement System (PERS); School Employees’ Retirement System (SERS); and Teachers’ Retirement System (TRS). The 2008 ERF is available July 1 for PERS, and September 1 for SERS and TRS.
Two ERFs for Members with 30 Years of Service Credit
Plan 2 and 3 members must be at least age 55 and have at least 30 service credit years to choose between the 2008 ERF and the existing three-percent ERF. The 2008 ERF provides a smaller benefit reduction than the three-percent ERF, but imposes stricter return to work rules.
2008 ERF Retirees and the Return to Work Rules
The legislation that created the new 2008 ERF also establishes new restrictions on the retirees who return to employment after retiring using the new ERF. These restrictions apply whether you hire the retiree as an employee or as a contractor.
When you hire a contractor to perform services for your organization you will need to inquire as to whether the individual providing the service retired using the 2008 ERF or whether the company is owned by an individual who retired under the new ERF and that owner would receive compensation as a result of the contracted service.
A retiree’s benefit payment will stop if they retire under the 2008 ERF and return to work in any capacity with a DRS-covered employer before age 65. A 2008 ERF retiree cannot receive a benefit for any month in which the retiree is compensated for work performed, or in any way receives financial compensation for the work being performed.
For your reference, below is text from a new member publication titled, Thinking About Retiring Early?
If you retire using the 2008 ERF, and have not reached age 65, you cannot work:
- In any capacity for a DRS-covered employer and continue to receive your benefit. If you do return to work, you will not receive your monthly benefit for any month in which you work. Your benefit will restart the first of the month after you stop working.
- You cannot earn compensation from a DRS-covered employer for services performed as a contractor, or as the result of service performed by those in your employ, and continue to receive a monthly benefit.
What is New for Employers?
- You are now required to collect retirement status information for 2008 ERF retirees that are compensated by contract or like agreement for services provided to your organization. We recommend you contact the appropriate staff within your organization to establish a process that will allow you to be informed about anyone associated with a contract or like agreement.
- You should begin using the updated Retirement Status Form in support of the new requirements
- You must report all 2008 ERF retirees compensated by contract or like agreement to DRS if they are under the age of 65. Report their begin date and use type code 99. Compensation and hours are optional.
- Report an end date (in their 65th birth date month) equal to the date of contract termination or 65th birth date, whichever comes first for any 2008 ERF retiree who is compensated by contract or like agreement .
- A new message “Retired under the 2008 early retirement factors. Stricter reporting and return to work rules apply” on Member Reporting Verification (MRV) informs you if the retiree chose the 2008 ERF. We recommend you use this tool to verify retirement status for all new employees and or individuals who are compensated by contract or like agreement.
- When we receive a begin date for someone younger than 65 who retired using the 2008 ERF, we will immediately notify you by e-mail that the retiree’s benefit will be stopped.(We will also be notifying the retiree.)
- For those 2008 ERF retirees you report using type code 98, we will e-mail you to request the number of hours worked in the retiree’s 65th birthday month after their birth date. This e-mail will also remind you that upon reaching age 65, the existing return to work rules apply, and the retiree may work up to 867 hours in a calendar year without loss of benefit provided they have had a least one consecutive 30-day break in service.
- For employers who do not use WBET to submit their regular reports - if your payroll software will not support reporting individuals compensated by contract or like agreement, you can use WBET.
What Administrative Rules still Apply?
- You are required to collect written information from all new employees about their status as a retiree (see RCW 41.50.139).
- Continue to report all retirees working in eligible or ineligible positions as directed in past notices from DRS.
- A member must terminate all employment to be eligible for retirement. Employers will be liable for pension overpayments if they do not use the appropriate reporting process to inform DRS they have hired a retiree.
- Employers who report a termination date in error will be liable for pension overpayments.
- Continue to follow your hiring process as directed in past notices with regard to hiring retirees.
- Employers must report a retiree as an active member when instructed to do so by DRS.
What is New for Retirees?
- Those that are eligible must choose between the 2008 ERF and the existing three-percent ERF.
- Those members retiring using the 2008 ERF cannot receive their benefit payment if they return to work in any capacity with a DRS-covered employer before age 65.
- The 2008 ERF retiree cannot receive his or her monthly benefit if the retiree is directly or indirectly compensated for work performed.
Reminders for Correct Reporting
- You can verify retirement status information by using the MRV application or by contacting Employer Support Services.
- The begin date you report should always be the actual first day of reportable, compensated employment.
- The separation or end date should in most cases be the actual last day of reportable, compensated employment. An exception can occur when an employee is on an official leave of absence.
- It is extremely important that we receive timely, accurate begin and end dates, because these dates affect benefit payments for retirees who return to work.
- For 2008 ERF retirees working in on-call positions, report an end date on each report you send us unless you know the individual will work in the following pay period. Reporting an end date requires reporting a new begin date (on next report) that is associated with the actual first day worked in the following pay period.
Actions by DRS
- We will stop the 2008 ERF retiree’s benefit beginning the first of the month of the begin date you report.
- Their benefit will restart the first of the month following the separation date you report. Once the retiree reaches age 65, they will be covered under the 867 rules (if they are an employee).
- DRS will continue to advise retirees to inform their employers of their status as a retiree from one of the retirement systems of Washington State.
Publications and Forms
We have created a new publication titled, Thinking About Retiring Early?, and updated several publications in support of this legislation. Below are the publications we recommend you review.
If you have any questions regarding this DRS Notice, please contact Employer Support Services at (360) 664-7200, option 2, or 1-800-547-6657, option 6, option 2; or email us.
Assistant Director of Administrative Services