DA Memo - April 21, 2006

New Rules for Working After Retirement

1. Brief Summary of Changes
2. Working for the Same KPERS Employer
3. Working for a Different KPERS Employer
4. More to Come

(1) Brief Summary of Changes

New legislation has changed the rules about KPERS retirees who work after retirement (House Substitute for SB 270). I have listed a brief overview below. Please see the sections later in the memo for more detail. These changes do not affect KP&F or the Retirement System for Judges.

Effective July 1, 2006:

• The $15,000 earnings limit increases to $20,000 for retirees who go back to work after
  retirement for the same employer.

• Employers will begin reporting employment status and annual earnings for most
  employed KPERS retirees, similar to the current process for active members.

• When they hire a new employee who retired from a different KPERS employer,
  employers will begin paying contributions equivalent to the employee contribution (4
  percent) plus the actuarially-required employer contribution (rate varies by employer),
  based on the retiree’s compensation.

(2) Working for the Same KPERS Employer

All retirees must wait 30 days after their KPERS retirement date to go back to work for a KPERS employer. Their KPERS retirement date is not their last day at their employer. It is usually the first day of the month following their last day at work. To calculate the 30-day waiting period, count the day after the retirement date as day one.

Retirees have an annual earnings limit of $20,000 (increased from previous $15,000 limit) if they:

1. Retired on or after July 1, 1988 , and
2. Go back to work for the same employer they worked for during their last two years
   of KPERS participation.

Earnings below the $20,000 limit do not impact benefits.

Important for You to Know

• The earnings limit is tracked by calendar year. Another $20,000 allowance
  begins each January.

• When retirees reach the $20,000 limit, they can (a) stop working and continue receiving
  KPERS benefits for the rest of the calendar year, or (b) continue working and stop
  receiving KPERS benefits until the next calendar year.

• Beginning July 1, employers need to provide employment and annual earnings
  information on employed retirees. We will develop a form or reporting method.
  More information to come.

• Employers do not make KPERS contributions.

Applying the Earnings Limit – 3 Examples

Example 1
John retired in December 2005 from the Kansas Department of Transportation*.
He returned to work with KDOT on February 1, 2006.
He earned $10,000 between February 1 and May 31, 2006.
He can earn $10,000 between June 1 and December 31, 2006, without affecting
his KPERS benefit.

Example 2
Susan retired on January 1, 2006, from the City of Herrington.
She returned to work for Herrington on February 1, 2006.
She earned $17,000 between February 1 and May 31, 2006.
She chose to continue working and have her KPERS benefits suspended in April when her
earnings reached $15,000 (the old limit).
Because of the new limit, KPERS will re-instate her benefits until her calendar year 2006
earnings reach $20,000.

Example 3
Debra retired on January 1, 2006 , from Unified School District #491, Eudora.
She returned to work for USD #491 on February 1, 2006.
She earned $15,000 between February 1 and April 30, 2006.
She stopped working when her earnings reached $15,000.
She may now return to work and earn an additional $5,000 before reaching the earnings limit
for calendar year 2006.

* State of Kansas is One Employer

For applying the earnings limit, the State of Kansas is considered one employer. Moving between state agencies, boards, commissions and Board of Regents institutions is not considered a change of employers.

Special Exceptions to the Earnings Limit

Retirees returning to work in some positions are exempt from the earnings limit:

• Certain legislative support staff
• “Daily call” K-12 substitute teachers – Daily call substitutes are teacher temporary and
  paid on a daily basis for their services. They are not required to work every day. The
  earnings limit does apply to long-term substitutes under contract.
• Licensed nurses at certain State institutions – This exception began July 1, 2005, and
  ends June 30, 2008.

(3) Working for a Different KPERS Employer

All retirees must wait 30 days after their KPERS retirement date to go back to work for a KPERS employer. Their KPERS retirement date is not their last day at their employer. It is usually the first day of the month following their last day at work. To calculate the 30-day waiting period, count the day after the retirement date as day one.

Retirees do not have an earnings limit if they return to work for a different KPERS employer than the one they worked for during the last two years of KPERS participation. However, legislative changes have created rules for employers based on a retiree’s post-retirement employment date, the first date the retiree begins working for the new employer.

Employment Dates Before July 1, 2006

• Employers will report annual earnings and employment status to the Retirement System.
• Employers do not make contributions.

Example – Different Employer, First Employed Before July 1, 2006
Joe retired on January 1, 2004 , from Cloud County.
He began working in a KPERS-covered position for the City of Concordia on March 1, 2004.
His new employer does not make KPERS contributions.

Employment Dates on or After July 1, 2006

• Employers will report annual earnings and employment status to the Retirement System.
• Employers do make contributions based on retiree compensation. This includes all
  retirees who first begin actively working in KPERS-covered positions on or after
  July 1, 2006.
• For fiscal year 2007, employers must pay:

Example – Different Employer, First Employed on or After July 1, 2006
Sally retires on August 1, 2006 , from the University of Kansas.
She begins working in a KPERS-covered position for the Lawrence School District on
October 1, 2006 . The Lawrence School District pays the combined rate of 13.75 percent,
based on Sally’s compensation.

(4) More to Come

KPERS will distribute additional information and detailed instructions in the coming months.
Watch for:

• Future communication about a new form for reporting retiree employment status.
• Employer rate letters to be delivered by the end of May.
• Instructions for reporting retiree earnings and contributions.

Questions?

• kpers@kpers.org
• toll-free (888) 275-5737
• in Topeka (785) 296-6166

Working after Retirement Guidelines
Effective July 1, 2006